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Oil and the Economy
Research from Jim Hamilton and Lutz Kilian is, to my mind the most complete and accurate about the economic consequences of oil disruption. Productivity growth is dramatically linked to energy, which is 80% fossile. There is no growth possible without carbon , mainly oil and gas... by Mar 1
Reserach from J-M Jancovici is enlightening links between energy, economic productivity growth and climate change... For a mainstream economist, reading this research is a true shock and reveals that we missed something : there is capital (human an physical), labour , but we never looked at productivity in resources .. by Mar 1
There is a frigthening caveat : we do not pay the marginal cost of plundering natural resources... Economic growth may be biased and its medium term consequence very worrying. If you are cold-blooded to face an unconvenient message...this must be read. by Mar 1
Newsweek and “Cheap oil forever” | Energy Bulletin - Mozilla Fir
That higher prices affect consumption can be seen most clearly in the USA where consumption of oil was highest at the beginning of 2007 after which it began to decline. But the decline was not sufficient so that, ultimately, the doubling of the price to the consumer was too much for our unstable economic system to tolerate. Some consumers could not manage the increased energy prices, the higher food prices and the higher costs for accommodation. The rest of the world was not affected as severely because the value of US dollar fell and many other nations had higher energy taxes. But like a snowball that begins rolling high up and becomes larger and larger, the problems in the American economy accelerated until they dragged the rest of the world down with them. It is interesting to note that the crash now and in 1979 came when the cost of oil exceeded 7% of global GDP.
My paper uses a number of different models that had been fit to earlier historical episodes to see what they imply about the contribution that the oil shock of 2007-08 might have made to real GDP growth over the last year. The approaches surveyed include Edelstein and Kilian (2007) , who examined the detailed response of various components of consumer spending, Blanchard and Gali (2007) , who studied the extent to which the contribution of oil shocks has significantly decreased over time, my 2003 paper , which emphasized the role of nonlinearities, and a model-free data summary of the observed behavior of different economic magnitudes following this and previous oil shocks. Although the approaches are quite different, they all support a common conclusion: had there been no increase in oil prices between 2007:Q3 and 2008:Q2, the U.S. economy would not have been in a recession over the period 2007:Q4 through 2008:Q3.
Econbrowser: Consequences of the Oil Shock of 2007-08
At the end of 2007, both gasoline and crude oil prices (adjusted for inflation) were at levels last seen in 1981 and they continued to climb throughout much of 2008. While Europe has been cushioned in part from these developments, as the dollar depreciated against the euro, the fundamental forces that drove up US gasoline prices have done the same in Europe. With retail gasoline prices in the US persistently above $4 per gallon, the determinants of gasoline prices is no longer an esoteric topic best left to industry insiders. The debate has moved into the mainstream. Congressional committees as well as media pundits have advanced explanations and proposed policy changes to stem or reverse the increase in gasoline prices. Why did this surge occur?
Supply or Demand driven oil shocks do not lead to the same consequences. The key issue : is the oil shock caused by fears of disruption or rising demand...The first case is likely to trigger a recession... We are waiting the answers from Killian for the 2008 shocks... Have any clue ? by Mar 1
Econbrowser: The oil shock and recession of 2008: Part 1 - Mozil
The oil shock and recession of 2008: Part 1 This is the first in what I'm planning will be a series of posts discussing the contribution that the energy price spike of 2008 made to our present economic difficulties. In this first installment, I revisit a very interesting research paper on the response of consumer spending to energy price increases written by Lutz Kilian (Professor of Economics at the University of Michigan), and Paul Edelstein (Senior Economist for Decision Economics ). I first brought this paper to the attention of Econbrowser readers in the spring of 2007. I thought now would be a good time to take a look at how well the equations in Edelstein and Kilian's paper can describe what we saw happen in the later part of 2007 and first half of 2008.
Oil is to blame according to Jim Hamilton . I tend to agree with him.. Look forward to hearing the conclusions from Lutz Kilian. by Mar 1
One way to put this in perspective is to compare what happened in 2007-2008 with what we saw in 1990-91. Prior to Iraq's invasion of Kuwait in August 1990, the U.S. economy had been growing slowly due to a weak housing sector. The sudden loss in oil production from Iraq and Kuwait resulted in one of the biggest increases in oil prices on record, which unquestionably contributed to the downturn in consumption spending and the auto sector that were key factors in turning that slowdown into the recession of 1990-91.
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