...Christine LaGarde, chief of the International Monetary Fund, said recently that high oil prices remain “a major threat” that could tip the global economy into recession, especially if Iran triggers a “price shock” by retaliating with further export cuts. Researchers at her agency have predicted that oil prices will permanently double to about $200 a barrel over the next decade.
The soaring prices, up from less than $24 a barrel a decade ago, are expected to cost European nations $500 billion this year, nearly triple the average they paid for imported oil from 2000 to 2010, partly because of the sunken value of the euro, Maria Van der Hoeven, executive director of the Paris-based International Energy Agency, said recently.
Energy costs also can share blame for crimping American workers’ standard of living. Adjusted for inflation, median weekly earnings over the last quarter-century rose less than $10, while crude oil prices nearly tripled and net U.S. gasoline prices doubled.
In a paper published in 2009, Hamilton reported that the price of crude oil has jumped sharply in advance of 10 of the 11 U.S. recessions since World War II.
His bigger discovery was that the sharp rise in prices before the economic collapse of 2008 didn’t stem from an Arab oil embargo, military conflict or other Middle East supply disruption, as occurred before five other major economic downturns. Instead, it was largely “booming demand and stagnant production” that briefly sent the price to a record $145 a barrel in July 2008, probably accelerating the crisis that sank the world economy, he found.
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