What does collapse of sovereign debt do to Oil prices?

Financial Historian, Niall Ferguson, talks about collapse of empires and fiscal crises:



And there's also a set of slides to go with the lecture:

FiscalCrises&ImperialCollapsesferguson201005

Now, considering that energy and commodities in general have become one of the biggest financial plays in the business, how do sovereign debt defaults alter this picture?

What happens in the investment world, when:

- countries can no longer grow the way they used to (i.e. consume less oil)
- more money escapes sovereign debt instruments and is looking for good profits (oil derivatives)

No easy answers here, but it does appear as a reasonable assumption that as markets try to discount the coming wave of defaults, more money will be flooding into commodity derivatives - at least as long as the music in the markets keeps playing.

And that possible mega-spike in commodity prices will be the final straw that breaks the back of the sovereign debt camel.

But before there, we still have this one extra round of deflation fighting to be dealt with. Hence, oil prices plummeting with almost everything else, except US government debt.

Once that is dealt with - with more printing - up we go.

Crack up Boom, anyone?