Oil shocks and recessions - Mozilla Firefox. Here I provide some more background on the relation between oil price increases and economic recessions.
When I first began working on my Ph.D. dissertation in 1980, I was intrigued by the fact that the oil embargo of 1973-74 and the collapse in Iranian oil production after the revolution in 1978 were both followed by global recessions. But when I called attention to the fact there had been a sharp increase in the price of oil prior to 6 of the 7 postwar U.S. recessions up to that point, the general response was one of skepticism. By the time I was presenting evidence of this relation at various seminars in 1981-82, the Iran-Iraq War had produced yet another shock to world oil markets and the NBER declared that the U.S. experienced a new recession immediately on the heels of the previous downturn, meaning that the evidence had now become that 7 out of 8 recessions had followed oil price increases. Dave Cohen argues that the GDP figures are too optimistic, and I agree.
Consequences of the Oil Shock of 2007-08. In a follow-up on my earlier post, I’d now like to discuss the second part of my paper, Causes and Consequences of the Oil Shock of 2007-08, which I presented today at a conference at the Brookings Institution.
Here I’ll review the role that the oil price shock may have played in causing the economic recession that began in 2007:Q4. 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. One of the most interesting calculations for me was to look at the implications of my 2003 model. The Association for the Study of Peak Oil and Gas.