Robert Samuelson: Why gas prices are soaring—and why they haven't hurt the brisk U.S. economy. Yet.
The United States has the energy policy it deserves, although not the one that it needs. Having been told for years that their addiction to cheap gasoline was on a collision course with increasingly insecure supplies of foreign oil, Americans are horrified to discover that this is actually the case. And yet, for all the public outcry and political hysteria over high gasoline prices, they haven't yet significantly hurt the economy—and may not do so. Since 2003, the economy has grown about 3.6 percent annually. It's still advancing briskly. That may be the real news....
It's conventional wisdom that big oil-price increases usually trigger a recession—or at least a sharp slowdown. Why haven't they? One oft-cited reason is that the economy has become more energy-efficient. True. Compared with 1973, Americans use 57 percent less oil and natural gas per dollar of output; compared with 1990, the decline is 24 percent. Cars and trucks have gotten more efficient, though not much more so since 1990. New industries (software programming, health clubs) use less energy than the old (steelmaking, farming). But there's a larger reason: the conventional wisdom is wrong.
Big oil-price increases in the past (1973-74, 1979-80 and 1990-91) did not cause recessions, though recessions occurred at roughly the same time. The connection has been repeated so often that most people probably accept it as gospel. But much economic research has concluded it's a myth. These recessions resulted mainly from rising inflation—inflation that preceded higher oil prices—and the Federal Reserve's efforts to suppress it. Higher oil prices merely made matters slightly worse. In 1980, for example, consumer prices rose 12.5 percent; excluding energy prices, they increased 11.7 percent.
This may explain the economy's resilience. One hopeful sign: most companies aren't passing along higher energy costs in their own prices. ...
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It's conventional wisdom that big oil-price increases usually trigger a recession—or at least a sharp slowdown. Why haven't they? One oft-cited reason is that the economy has become more energy-efficient. True. Compared with 1973, Americans use 57 percent less oil and natural gas per dollar of output; compared with 1990, the decline is 24 percent. Cars and trucks have gotten more efficient, though not much more so since 1990. New industries (software programming, health clubs) use less energy than the old (steelmaking, farming). But there's a larger reason: the conventional wisdom is wrong.
Big oil-price increases in the past (1973-74, 1979-80 and 1990-91) did not cause recessions, though recessions occurred at roughly the same time. The connection has been repeated so often that most people probably accept it as gospel. But much economic research has concluded it's a myth. These recessions resulted mainly from rising inflation—inflation that preceded higher oil prices—and the Federal Reserve's efforts to suppress it. Higher oil prices merely made matters slightly worse. In 1980, for example, consumer prices rose 12.5 percent; excluding energy prices, they increased 11.7 percent.
This may explain the economy's resilience. One hopeful sign: most companies aren't passing along higher energy costs in their own prices. ...