Oil, economic growth and recessions revisited

Here I re-tread a well-trodden path, but with recent events in the oil market I thought a brief recap might be timely.

I begin with a photographic illustration of a typical US demand response to the tripling of oil prices that occurred during the first “oil shock” in 1974:

Demand response after a tripling of oil price, USA, 1974

Those long lines of gas-guzzlers were indeed a demand response, but not to the oil price increase. They were a reaction to the nationwide shortage of gasoline caused by the oil embargo that accompanied it. Americans, like George Patton’s tanks during the Normandy breakout, just gotta have gas. And still do.

Fluctuations in oil price, particularly “oil shocks” are nevertheless believed to have had a major impact not only on the US economy but on the global economy as a whole since 1974, and here we will revisit some basic macroeconomic data to see how well this contention holds up.

It’s claimed that oil shocks have caused a number of global recessions, but before we can verify this we have to define what a global recession is. A recession in the US is usually defined as two consecutive quarters of negative GDP growth, but there has never been a universally-accepted definition for a global recession, and according to the annual World Bank GDP data I have to work with 2008 was the only year since 1965 in which the world economy experienced negative real GDP growth:

Figure 1:  Annual global GDP

Fortunately per-capita GDP, which compensates for the population increases that are a major driver of absolute global GDP, is more diagnostic (Figure 2). We now see a series of ramps, with periods of growth separated by periods of no growth. These no-growth periods identify four distinct downturns since 1965 (the downward “blip” in 2001 was caused by unusually high growth in 2000 and goes away when the 200o data are ignored), and since these downturns seem to define global recessions as well as anything I have used them to define recessionary periods, which are depicted by the gray vertical bars:

Figure 2:  Annual global per-capita GDP

Now we will superimpose oil prices on the recessionary periods. Figure 3a compares annual per-capita global GPD with constant 2013 dollar annual crude prices from BP (Arabian light to 1983 and Brent after 1983). Figure 3b, which compares them with quarterly West Texas Intermediate Crude prices gives more detail on short-term price movements, although absolute prices are not exactly the same as those given by BP.

Figure 3: Annual global per-capita GDP vs. (a) BP annual oil prices and (b) quarterly West Texas intermediate crude prices

As Figure 3 shows, and as others before me have noted, each of the four global recessions since 1965 occurred immediately after an abrupt oil price increase, and since the chances that this is coincidence are vanishingly small we can accept that oil price increases played a role, quite likely a dominant one, in all four recessions, including the 2008 “Great Recession”, about which more later.

What other impacts have oil price fluctuations had on global GDP? I have numbered some of the more salient events on Figure 4 and offer brief comments on each below:

Figure 4:  Salient economic events, 1965-2013

1.  The first oil shock triggers the 1974/75 recession.

2.  GDP growth regains pre-1974 levels despite a much higher oil price.

3.  The second oil shock triggers the 1980-81 recession.

4.  The 1981-82 “double-dip” recession is engineered by US Fed interest rate policy.

5.  The oil price collapse of 1985-86 has no visible impact on GDP growth.

6.  The third oil shock, coinciding with the Iraqi invasion of Kuwait, triggers the 1991-94 recession.

7.  Real oil prices briefly fall back to pre-1974 levels.

8.  A “semi-shock” causes growth to fall off in some countries – notably the US (see Figure 6).

9.  A tripling of real oil prices between 1999 and 2006 has no visible impact on GDP growth.

10.  The fourth oil shock precedes the “Great Recession”.

11.  The increasing price trend since 1999.

What these results tell us is that the global economy reacts immediately and violently to abrupt “oil shocks” but doesn’t much care what the oil price does at other times. (As to why the global economy responds only to the “shocks”, my belief is that it’s largely psychological. Like when your faithful and loving dog, who has been lying quietly and peacefully asleep in the corner, suddenly jumps up, bares his teeth and growls at you.)

It also doesn’t take much teeth-baring to send the global economy into a tailspin. The oil shock of 1990-91 increased oil prices by only 50% and lasted for only a couple of  quarters, yet it was followed by a global recession that lasted for three years.

Two other key questions are: How long will the upward trend in oil prices that began fifteen year ago in 1999 continue, and is the painfully slow recovery from the Great Recession in Europe a result of high real oil prices? (Note: I don’t have the answers.)

Figure 5 now plots oil price against oil consumption instead of per-capita GDP. It’s similar to the Figure 4 plot, but the impact of the second oil shock now really stands out. Before 1980 consumption was on an upward roll, interrupted only temporarily by the first oil shock. Then between 1979 and 1982 it fell by almost 10% in absolute terms and by about 25% relative to what it would have been had the pre-1980 trend continued. Since 1982 consumption growth has resumed, but at less than half the pre-1979 rate. The growth has also been effectively straight-line, and largely uninterrupted. Even the Great Recession had a muted impact, reducing oil consumption by only a few percent below what it would have been had the pre-2008 trend continued:

Figure 5: Annual global oil consumption vs. BP oil price

There’s also no evidence that oil price fluctuations had any more impact on consumption than they did on GDP outside recessionary periods. Neither the oil price collapse in 1985-86 nor the tripling of oil prices between 1999 and 2007 had any visible impact, although some of the recession-induced consumption decreases, particularly the one during the Great Recession, clearly had a depressing impact on price.

Figure 6 shows XY plots of the annual data from the above Figures. There is no significant relationship between annual percentage changes in oil price and real per-capita GDP nor between annual percentage changes in oil price and oil consumption. There is, however, a relationship between annual percentage changes in real per-capita GDP and annual percentage changes in oil consumption, particularly before 1986, and the relationship is positive, i.e. with consumption increasing as GDP increases. I interpret this to mean that GDP growth is driving consumption, which is the basis for my comments on earlier threads that wealth now generates oil and not the other way round:

Figure 6: XY plots comparing per-capita GDP, oil price and oil consumption

A final word on oil and the “Great Recession”. It’s generally accepted that this recession was triggered by what are now euphemistically called “structural defects” in the financial markets and had little or nothing to do with oil. Wikipedia, for example, gives a long list of potential contributors, starting with subprime lending and the housing bubble, and while it does eventually get around to mentioning oil it doesn’t get there until section 14.8.

Yet immediately preceding the Great Recession in the US, where it began, was another humongous oil price spike (Figure 7. Note that all data are quarterly and that recessions, defined as two consecutive months of negative GDP growth, are shown as blue bars). The leading edge of this spike was at least comparable in amplitude and intensity to the leading edge of the spike that preceded the 1980-81 recession and much larger than the one associated with the 1990-91 recession. The spike also occurred after the approximate threefold increase in real oil price between 1999 and 2007. Between the low of ~$16/bbl in the fourth quarter of 1998 and the peak of ~$125/bbl in the second quarter of 2008 the price of a barrel of West Texas intermediate crude in fact increased by a factor of almost eight in real terms:

Figure 7: US GDP vs. West Texas intermediate crude prices, quarterly data

Surely this is a slam dunk. If oil prices triggered the three earlier recessions then they triggered the Great Recession too. At least one economist agrees. In a 2009 paper presented at the Brookings Institute John Hamilton concluded that “had there been no increase in oil prices between 2007:Q3 and 2008:Q2, the US economy would not have been in a recession.”

And what of the future? At present oil is in oversupply and the oil price is heading south, so barring unforeseen events there doesn’t seem to be much chance of another oil shock in the next year or so. It is notable, however, that oil shocks since 1980 have occurred about once every nine years (in 1980, in 1990, in 1999 if we count the “semi-shock” and in 2008), so we may not be all that far away from the next one.

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31 Responses to Oil, economic growth and recessions revisited

  1. Ivan says:

    A have a couple of comments:
    1. to assess the relationship between oil energy (in facts, liquids) and GDP, energy should be accounted in energy terms, not in volume (barrels). A barrel of NGLs or biofuels does not contain the same energy than a barrel of conventional oil.
    2. The causality between annual percentage changes in real per-capita GDP and annual percentage changes in oil consumption, is too complex to simply assert: “I interpret this to mean that GDP growth is driving consumption”. Recent works point out in the opposite direction (e.g. http://www.parisschoolofeconomics.eu/IMG/pdf/article-pse-medde-juin2014-giraud-kahraman.pdf)



    • Ivan:

      On your point 1: You are undoubtedly right, but I don’t have the data.

      On your point 2. World GDP and world oil consumption are closely linked, which does create a “chicken and egg” problem. Is oil driving GPD or is GDP driving oil consumption? We find one clue in the numbers. World GDP in 2013 was $74.9 trillion US, but the value of oil consumed was only about 4% of that ($3.3 trillion). Is it likely that the $3.3 trillion is driving the $74.9 trillion? You can argue that without the $3.3 trillion there wouldn’t be any $74.9 trillion, but you can make the same argument for a number of other commodities that the world can’t do without, such as steel, concrete and wheat.

      • dennis coyne says:

        Hi Roger,

        The data can be found at the EIA for C+C and NGL, just multiply barrels of NGL by 0.7 to get a barrel of oil (crude) equivalent.

        • Dennis: The proportion of NGL has been growing slowly over the years but still only amounts to about 10% of total production. Factoring this down by 0.7 won’t make much difference.

          • dennis coyne says:

            Hi Roger,

            It would have the benefit of being accurate. A lot of the growth in oil output has been NGLs. If we want to compare apples with apples, For example for 2013 average C+C output was 76 Mb/d and NGL was 9 Mb/d for an apparent 85 Mb/d of C+C+NGL, but if we adjust the NGL to barrels of oil equivalent we have 6 Mboe/d for a total of 82 Mboe/d for C+C+NGL about 3 % lower.

            Also it is the rate of growth that is important. NGL grew from 7 to 9 Mb/d since 2004 or by about 25%, Crude grew from 72.5 to 76 Mb/d since 2004, or about 5%.

      • dennis coyne says:


        I mostly agree with your second point, except that liquid petroleum products power a lot of the transportation in the world and it is difficult to change this quickly. So the world economy might respond differently to a shortage of oil. For the US at least research by James Hamilton suggests 4% expenditure on oil tends to lead to recession.

    • Ed says:

      I would say that the causality between annual percentage changes in real per-capita GDP and annual percentage changes in oil consumption is two way.

      i.e. An increase of GDP would cause an increase in energy consumption AND an increase in energy consumption would cause an increase in GDP. They go hand in hand.

      Wealth creation is not the same as GDP growth. Much of our current GDP is used by the energy sector so we don’t have access to that part of GDP. That is why our standard of living is not increasing in line with GDP growth. As more of our GDP goes into producing energy (as eroei declines), it becomes harder and eventually impossible to increase or maintain our standard of living over time.

  2. Sam Taylor says:


    Interesting post. I think I agree that generally a very sharp change in oil price would produce the most noticeable response from the economy, but at the same time it seems reasonable to assume that there is a ceiling price that the economy can bear, though perhaps the adaptations made during a time of slow increases serve to increase the ceiling price somewhat?

    I think that one key difference between the recession/oil price spike in the late 70’s/early 80’s and the one in the mid 2000’s was the underlying cause of the price spike.

    If I’m not mistaken (it was a few years before my time!) the spike in 79 was triggered by geopolitical turmoil in Iran and the middle east, which negatively impacted supply and started a panic which drove prices sky high. This then obviously impacted on consumption/demand.

    The run up in the mid 2000’s was fundamentally different, in that growing demand from developing countries (in particular China) collided with an oil supply which was constrained and unable to grow. This then sparked a bidding was between consumers in the developed and developing countries which, if you look at changes in consumption, the developing countries won handily. I believe this goes some way to explaining the continued economic struggles of the advanced economies and the continued growth in oil consumption.

    I’d also be cautious about saying we’re out of the woods regarding oil shocks. The mechanics of shale drilling mean that changes in production in such plays will be much more tightly coupled temporally to the oil price. As shale grows to provide a larger fraction of global oil, I think this might serve to increase price volatility.

    • Sam:

      If my previous assessment is correct the ceiling price is $200/bbl. Still a long way to go.


      I agree that the causes of the oil price spikes were different, but whether the global economy gets shot, stabbed, poisoned or beaten over the head with a blunt instrument doesn’t really matter. The price spikes, or “shocks”, howsoever caused, are what do the damage.

      • dennis coyne says:

        Hi Roger,

        It is doubtful that the World would not experience a recession at oil expenditures above 5% of World GDP. In real terms $200/b oil might be possible in 20 or 30 years without causing a severe economic downturn.

        Also the last chart in that post doesn’t really look like it is statistically significant, so I think the 8% guess is highly speculative, note that when oil expenditures went above 4% worldwide in 2008 we saw the first negative change in World GDP since 1950 (in 2009). So 5% would probably be more realistic, which for 2014 GDP estimated at 76000 billion dollars (assuming 3% growth from 2013) and 86 million barrels of oil equivalent per day would give a “cheap price” of $121/b in 2013 $.

        This price will increase with GDP if we assume 3% growth in World GDP (optimistic in my view) and that oil supply can grow at 1% per year then the cheap price would increase to about $147/b (2013$) by 2024.

        If we assume 2% World GDP growth for the following 10 years with flat oil output we get a “cheap” real oil price of $179/b (2013$)in 2034.

        For the following 10 years lets assume zero economic growth (in real terms), note that this would be negative growth in per capita terms and a decrease in oil output of 2% per year, cheap oil would then be $221/b(2013$) in 2044.

        I am very doubtful that world economic output or oil prices would play out in this manner, the point is that $200/b oil in 2013$ will not be considered cheap in the near term, but it might be “cheap” in 2040, a lot depends on future oil output, economic growth, and the economy’s capability to find substitutes for liquid petroleum products as higher prices cause changes in consumption and investment.

        • The last chart in that post doesn’t really look like it is statistically significant, so I think the 8% guess is highly speculative

          Dennis, I think you’re referring to the chart from my “cheap oil” post below, and you’re right, the trend probably isn’t statistically significant and the 8% number is indeed speculative. I admitted as much in the post (“This crude estimate is of course subject to considerable uncertainty”). But the $200/bbl “cheap oil” price it gives is a number, which is what I was after, and your “cheap price” estimates of $179/bbl in 2034 and $221/bbl in 2044 would be within the error bars.

          It is doubtful that the World would not experience a recession at oil expenditures above 5% of World GDP ….. note that when oil expenditures went above 4% worldwide in 2008 we saw the first negative change in World GDP since 1950 (in 2009). So 5% would probably be more realistic

          Here’s the chart from the “cheap oil” post that plots percentage of world GDP spent on oil against consumption. The 5% threshold was exceeded only between 1979 and 1984, and while the upswing triggered a recession, the recovery – which was delayed for about a year by US Fed inflation-fighting interest rate hikes – began while the world was still spending more than 5% of its wealth on oil. For the last few years the world has been spending about 4% – above the historic mean – but the recovery in oil consumption continues despite the lingering hangover from the Great Recession. The percentage the world spent in 2013 in fact exceeded 4% but oil consumption still grew by 1.6%, the same as the average annual consumption growth rate between 1986 and 2003, when the world was spending only half as much of its money on oil as it is now.

          • dennis coyne says:

            Hi Roger,

            I agree that the World economy may be able to deal with oil expenditures above 4%, over time with higher oil prices substitutes may be found which will enable higher oil prices without a recession. The long period with oil expenditures above 5% in 1980 to 1985 shows that it takes time for the economy to adjust to higher oil prices.

            The main point is that whether $200/b is cheap depends on how soon that happens. If oil prices rose to $200/b(2013$) in 2015, I am confident that a recession would result (which would bring prices down). If oil prices fell to the point where oil expenditures remained at above 5% of GDP, GDP growth would likely remain below 2%. Generally World GDP growth of less than 2% is considered a recession.

            I don’t think 4% applies to the World, but 5% probably is the right number for the next 10 years. Eventually 8% might even work, but I doubt we will get to that point due to declining output and substitutes replacing oil (over the next 40 years).

    • Euan Mearns says:

      Roger, I am largely with Sam here. The oil shocks of 1974 and 1979 were very sharp withdrawals of supply that led to the queues at gas stations that you high light. It had nothing at all to do with a shortage of oil. The 2002 to 2008 spike is very different and a manifestation in my opinion of the first stages of Peak Oil that is going to cause the world a whole pile of grief in the decades ahead, partly because the cause of the pain in the world economy is not understood and where it is understood it will be denied.

      2005 – 2008 every country on Earth was pumping flat but could not meet the demand for oil that your charts show just keep going up with population growth and rising aspirations of the poorer populace. Not enough oil to go round, the axe fell on southern Europe. The squeeze 2002-2008 set in motion market responses that 1974 and 1979 took a while to alight. Saudis built their rig count dramatically, USA went bananas drilling shale. There was time for substitutions, hence, oil dragged all energy prices up.

      Folks are now spending a lot more on energy – gasoline, nat gas and electricity – that they were before, hence they cannot afford to pay 5% rent on borrowed money and many cannot afford a vacation, and believe it or not, many cannot afford an iPad or an iPhone. That is in the OECD, where the have nots are making way for a a new generation of haves in China where the number 1 priority is to own an iPhone, that is until the Dragon phone comes along that will do twice as much for half the price. More in my next post. From a desert island with expensive if not rather ropey wifi.

      • Roger Andrews says:

        Euan: If you’re with Sam you’re with me too because I haven’t disagreed with anything he said and I don’t disagree with anything you said except maybe your comment regarding peak oil, a subject on which I don’t think we presently have enough data to reach a conclusion. All I was trying to do in the post was demonstrate the connection between oil shocks and global downturns without worrying about the causes of the shocks, which as you correctly point out are different in every case.

        Any wavy palm trees on your desert island, incidentally? 😉

        • Euan Mearns says:

          Not many wavy palm trees here. This is a desert island. Lots and lots of waves. Some very interesting fragile coastal lagoon systems that seem to be in rude health despite periodic volcanic eruptions and continuing sea level rise post LIA and mid interglacial.

          • Talking of volcanic eruptions, I guess it’s occurred to you that you too are now within rock-throwing range of a “Decade Volcano”, although still not as close as I am. 😉

          • Euan Mearns says:

            I think one of the most recent eruptions on the Canaries was on Lanzarote, maybe 40 years ago. Tiede on Tenerife is the biggest peak and one of the most active – was up that last year. The interesting thing about Tiede is that you start on desert by the coast and drive up the mountain through mediterranean and then temperate rain forest ending up in Arctic conditions on the top. You’d think this would be like a canary for climate change 😉 But to the lay man’s eye all looks well apart from the occasional burned forest – which is good for the forest.

            One day there will be another large eruption somewhere here that I imagine might ruin someone’s vacation.

      • dennis coyne says:

        Hi Euan,

        There are differences, but if we want to see what happens to the World economy when oil prices rise, the 79 to 82 experience fits the bill very well, the earlier shock in 73-4 not so much.

        There is never really a shortage of oil as long as prices are allowed to adjust. In the US in 73-4 the government tried to fix prices and that lead to shortages and long gas lines. The same mistake was not made in 79 to 82.

        If your main point is that prices rose very quickly due to a supply shock in 73-4 and 79-82, the rise in prices in 2008 was different as it happened over several years and the final sharp peak in 2008 may have been over concern that peak oil had arrived, the financial meltdown has hidden the problem of peak oil as the World economy has been growing more slowly and high prices has allowed oil supply to increase. At some point (5 years would be my guess) we will reach the peak, if prices don’t spike too quickly (maybe a 5% per year rise in real oil prices) the economy may be able to adjust without a severe recession, doubtful in my opinion, but still possible.

  3. Hugh Sharman says:

    I suspect that, very shortly, we shall find out the price level for light oil at which drllling and fracking for this stuff in North Dakota and Texas is uneconomic! Excess supply will cease, so expect a price recovery soon after.

  4. Hugh Sharman says:

    BTW Roger! Thanks! A timely article!

  5. Graham Palmer says:

    Dodson and Sipe (and others) have drawn attention to the linkage between car dependance in outer suburbia, mortgages, and interest rates, highlighting the vulnerability of (particularly) first-home buyers in the ‘burbs. They produced a so-called ‘VAMPIRE’ index (vulnerability assessment for mortgage, petroleum, and inflation risks and expenditure)


  6. Aki Suokko says:

    Very nice article, Roger! Here is a paper claiming that high gasoline prices triggered the housing crisis 2007. http://ecnr.berkeley.edu/vfs/PPs/Sexton-Ste/web/housing_gas.pdf. And here is a nice piece from Jeff Rubin (pages 4-7): http://research.cibcwm.com/economic_public/download/soct08.pdf.

    • Roger Andrews says:

      Thanks Aki.

      Rubin & Buchanan end their article with the statement: “If triple-digit oil prices are what started the recession, then $60 oil prices are what will end it.” Figure 3a shows that this is pretty much what happened – the average annual oil price fell back to ~$65 in 2009 and global GDP began to take off again.

      But in 2010 the oil price went back up to ~$85 and in 2011 to ~$115, as high as or higher than it was when the recession began. Yet the recovery continued. This should not have happened. The world should have been plunged back into recession again.

      I sometimes get the feeling that economists are trying to fit oil into a classical supply-demand-price model that it doesn’t want to fit.

      • Aki Suokko says:

        Thansk, Roger! I think we cannot actually compare oil prices one to one before and after the crisis of 2007 – 2009 since the economic background is so different. The economic growth after the crisis of 2007-2009 is something very different than it was before it, isn’t it. At least in USA the bottom 99 % of the households do not see that their standard of living is increasing right now although GDP increases. The interest rates are historically low and quantitative easing has been most likely supporting what we call economic growth. Also global debt/GDP ratio had increased more rapidly after the crisis. If all these measures were taken away I think the economic growth would be close to zero or even below in most OECD vountries. All those measures might support the global economy so that the economy can absorb higher oil prices. Do we have any measures or means to adjust oil prices to changing FED policy and/or debt/GDP level so that they are more comparable? Is it even needed to normalize the oil prices somehow? How do you see it, Roger?

        • Aki: I don’t think you can adjust the oil price to account for changing Fed policies or debt levels. The oil price is the oil prices is the oil price. You might try adjusting GDP to account for the changes you mention, but I’ll leave the calculations up to you. 😉

  7. Carl Hellesen says:

    Hi Roger,

    One comment about the connection between oil price and consumption in the 1970’s and 1980’s. You didn’t mention that this period also saw the introduction of a new technology, nuclear power, which clearly affected the consumption pattern.

    If you isolate the oil consumption for electricity production there is practically a collapse around 1979. See figure in the link below for a picture.


    And the consumption never recovered in countries that expanded nuclear, like Japan, USA and France. This is in contrast to countries that didn’t expand nuclear, like Italy, where a recovery was seen in the mid 1980’s.

    Looking instead at the energy consumption for transportation, the oil crisis is manifested more like a plateau between 1979 and 1982. It didn’t decrease at all. And this is probably because there were no alternatives to oil.

    So I would draw the conclusion that what happened during the 1970’s, and summarised in your fig 5, was just as much the result of the expansion of nuclear power. The sudden price shocks just made it happen even faster. That would also explain why the reactions to later price shocks were smaller.


  8. Steven Kopits says:

    “3. The second oil shock triggers the 1980-81 recession. 4. The 1981-82 “double-dip” recession is engineered by US Fed interest rate policy.”

    As a practical matter, this is a single recession. If you look at the US oil data or European CEPR recession dating, you’ll see it’s functionally a single recession, and the Europeans treat it as such.

    “5. The oil price collapse of 1985-86 has no visible impact on GDP growth.”
    Compared to what? To 1980-1983. That’s untrue. But growth was not at fast as in the early 1970s. But oil wasn’t as cheap either, even after the price collapse of 1985. The period for 1983 – 2005 is known as the Great Moderation. See slide 31 of my Columbia presentation. It’s very clear in the data. http://energypolicy.columbia.edu/sites/default/files/energy/Kopits%20-%20Oil%20and%20Economic%20Growth%20%28SIPA%2C%202014%29%20-%20Presentation%20Version%5B1%5D.pdf

    “6. The third oil shock, coinciding with the Iraqi invasion of Kuwait, triggers the 1991-94 recession.”
    True, but this was really a mini-shock. I don’t count it as such.

    “9. A tripling of real oil prices between 1999 and 2006 has no visible impact on GDP growth.”
    This is correct, but keep in mind increasing oil prices were offset by easy money. You can, however, see the impact on productivity growth after 2005 when oil supply stalls out. Here’s Brad DeLong’s take on John Fernald’s analysis of US productivity growth, for example. http://equitablegrowth.org/2014/07/17/draw-different-message-john-fernalds-calculations-tursday-focus-july-17-2014/

    “10. The fourth oil shock precedes the “Great Recession”.”
    Yes, this was also clearly a financial crisis.

    “11. The increasing price trend since 1999.”
    You’re missing another oil shock. The Arab Spring was also an oil shock. Hence the European recession. There’s is also a crypto recession in the US at the time. You can see it in the data. I’ll post on this.

    • Steven:

      Thank you for your comments.

      I will defer to your expert judgment in most of these cases. However, I do have observations on a couple of them:

      The 1981-83 recession in the US was unquestionably a double-dip event, and the second dip was unrelated, or at least not directly related, to oil. As Wikepedia puts it, citing references in the process, “Principal causes of the 1980 recession included contractionary monetary policy undertaken by the Federal Reserve to combat double digit inflation and residual effects of the energy crisis.[4] Manufacturing and construction failed to recover before more aggressive inflation reducing policy was adopted by the Federal Reserve in 1981, causing a second downturn.[2][4]“

      I’ve summarized the key elements in the graphic below. The 1980 recession followed the “oil shock” but there was no price change preceding the 1981-2 recession. It was, however, preceded by a large increase in real interest rates (federal funds rate minus inflation).

      Euan Mearns wrote a post on the Arab Spring “oil shock” in January. His conclusion was ”The loss of this production has had surprising little effect on international oil markets. Syria, Yemen and Tunisia were never significant exporters and the loss of production in those countries is a simple loss of energy supplies to the indigenous populations. The loss of Libyan and Sudanese exports has likely been cancelled by increased production in N America.”


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