Every time we see oilprices
go up we hear that it will cause inflation and/or the economy will go into the tank.
… 7 out of the 8 postwar U.S. recessions had been
preceded by a sharp increase in the price of crude petroleum. Iraq's
invasion of Kuwait in August 1990 led to a doubling in the price of oil
in the fall of 1990 and was followed by the ninth postwar recession in
1990-91. The price of oil more than doubled again in 1999-2000, with the
tenth postwar recession coming in 2001. Yet another doubling in the
price of oil in 2007-2008 accompanied the beginning of recession number
11, the most recent and frightening of the postwar economic
downturns. So the count today stands at 10 out of 11, the sole exception
being the mild recession of 1960-61 for which there was no preceding
rise in oil prices
. [Hamilton, 2009. Rv. 2010]
The premise is wrong. What causes price inflation is an expansion of
money supply (and a desire of people to spend it, often quickly). What
causes recessions is malinvestment of capital caused, again, by money
supply expansion.
The classic argument is that because 70% of the economy is driven by
consumer spending, an increase in gasoline prices will cause a decrease
in consumer spending, which will cause an economic decline. Sounds
logical on its face. There are empirical studies that show either
increases in gasoline prices will not impact discretionary spending (McCarthy, 20110) or that large increases in petroleum prices will cause recessions (Hamilton). Take your pick.
The above chart1 shows the peak of real YoY GDP percentage
change (light blue lines) and the relative price of gasoline (red), the
product that most directly affects consumers. If gasoline prices have
been increasing prior to the peak, then there is statistical data
showing that those prices may have had an impact on GDP.