Economic impact of high oil prices not as much as predicted
As crude oil prices continue to hover around record levels (on a non-inflation-adjusted basis), the debate about just how much damage the US economy might sustain is fairly muted. In a new survey that tends to reinforce what I've said all along, 79% of the economists surveyed believe that crude oil wil have to top $80/barrel (on a sustained basis) to trigger a recession in the US.
According to the Wall Street Journal Online's economic forecasting survey, 31% believed sustained prices in the $81-89/barrel range would trigger a recession; a whopping 48% believe crude would have to top $90/barrel. That latter level, of course, gets us close to the "oil shock" levels of the early 70s on an inflation-adjusted basis.
Of additional interest is that last August, in a similar survey, 37% of the economists felt that the trigger-point for a recession would be oil prices in the $50-59/barrel range. This year, none of the respondents think sustained $50 oil will cause a recession. The US economy is proving much more resilient than even the experts predicted.
Technorati tags: Oil Prices | US Economy
Bryan, we're also starting to see the first trickle of corporate earnings warnings (Ford, for one, today) pointing to higher oil prices as a damper.
Of course, Ford gets a double whammy, as steel prices are through the roof too. But, then, part of the problem with steel is that the oil companies are buying it all up for drilling pipe and pipelines. Vicious circle, in other words.
Still, gasoline prices in and of themselves don't have the same relative impact that they did back in the 70s, due to better fuel efficiency. I've seen articles that predict that $4.00 gasoline will be needed to significantly change driving/buying habits.
Posted by: Eric at April 8, 2005 04:46 PMI think it'll take a sustained $4 a gallon price before people even start to make changes, and even then, it's going to take a long time to sift through the culture. After all, there are plenty of people like myself who live far out in the woods, without benefit of city buses or subways. Couple that will all the little exurban and suburban subdivisions with names like WyldeWood, Pear Forest, Wind Chase and Eagle Mount, and it's going to be very hard to change cultural habits re: oil.
And the cost of hybrid fuel cell vehicles continues to make them unattractive when people can buy a Kia for less than $10,000 or, more likely, a 1995 model SUV for $2,000-$4,000.
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I think you'll start seeing more of an impact in the next couple of months as lower-income folks have to spend more on gas that might have been spent on less important things like entertainment. And while prices have risen to about $2 in S.C. previously, they are now at $2.19 down the street from me. That starts to cut into the take home pay, if you know what I mean.
Posted by: bryan at April 8, 2005 04:23 PM