America Needs to Chill Out about Oil Prices

America Needs to Chill Out about Oil Prices

09/02/14

Nikos Tsafos

Oil, Energy, Domestic Politics, United States

Oil prices matter far less for economic activity than we give them credit for. 

American diplomacy operates under a perennial fear of disrupting oil markets—from Moscow to Tehran, and from Caracas to Baghdad, foreign policy resembles someone trying to tiptoe towards the treasure without waking the sleeping dragon guarding the gates. Daily, we are told that a fragile America will collapse if oil prices rise further. As Daniel Yergin, the Pulitzer Prize–winning author of The Prize, put it, if oil production in the United States were not rising, “We’d be looking at an oil crisis. We’d have panic in the public. We’d have angry motorists. We’d have inflamed congressional hearings and we’d have the US economy falling back into a recession.” These views are common and hark back to the 1970s, when two oil shocks are thought to have brought on “stagflation,” a mix of anemic growth, persistent inflation and high unemployment. Then, in 1983, James Hamilton pointed out that an oil-price spike had in fact preceded every American recession except one since World War II. Oil has haunted America ever since.

Read full articlehttp://nationalinterest.org/feature/america-needs-chill-out-about-oil-prices-11174