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September 01, 2006
Why high energy prices haven’t killed the economy
The price of oil has more than doubled from $30 a barrel to $75 in the last three years, and yet the economy is still on its feet. N.C. State University economist Mike Walden explains why the economy crashed as it did in those previous years when the price of oil spiked.
"Those years were 1974, 1979 and 1990 … when the price of oil also jumped and yet we had a recession that followed. The reason we haven’t had a recession, at least yet today, apparently is a difference in timing.
"In those previous episodes, the hike in oil prices was very sudden -– occurred over only a couple of months. This time it’s taken much longer.
"We’ve had a steady rise in oil prices over three years. Now with more time, the economy has been able to adjust and look for at least partial ways around the high price of oil.
"This doesn’t mean we are out of the woods. If something dramatic happened -- for example, in the Middle East or North Korea -- and we had a very rapid run up in oil prices over a short period of time clearly that could send us into a recession."
Posted by deeshore at September 1, 2006 07:44 AM