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High Oil Prices Are a Bigger Problem Than You Realize

businessinsider.com -- There is ample evidence that spikes in oil prices leads to recession, at least in the US, which is an oil-importing nation. James Hamilton has shown that 10 out of the last 11 US recessions were associated with oil price spikes. How does this happen? An analogy can perhaps help explain the situation. This analogy also sheds light on a number of related economic mysteries:

How can oil have a far greater impact on the world economy than its share of the world GDP would suggest? After all, BP’s World Energy Outlook to 2030 shows the world cost of oil is only a little over 4% of world GDP.

How can high oil prices continue to act as a “drag” on the economy, long after the initial spike is past?

Why isn’t a service economy insulated from the problems of high oil prices? After all, its

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Submitted Feb 01, 2013 By: teafortwo

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honda0105 Champion Author Tallahassee Posts:18,650 Points:1,612,445 Joined:Nov 2008	Message Posted: Feb 4, 2013 3:00:14 AM Ignore honda0105 Report Abuse Reeeeeaaaallly??? Whoddathunk that?
blueliner16 Champion Author Detroit Posts:9,730 Points:2,177,030 Joined:Aug 2006	Message Posted: Feb 3, 2013 4:30:20 AM Ignore blueliner16 Report Abuse Agreed, tomok.
tomok Champion Author Portland Posts:33,088 Points:2,348,435 Joined:Aug 2006	Message Posted: Feb 2, 2013 7:29:00 PM Ignore tomok Report Abuse High Oil Prices Are a Bigger Problem Than You Realize! Lower fuel prices would help this very bad economy recover just a little faster but that will not likely happen very soon. Big Oil and Big Gas sells fuel and natural gas on the world market for higher prices to other countries. 'Coming out of the closet' Sneeky's lousy, smoke and mirrors, lack of jobs, dog and pony show and in the crapper economy, the jobs are Not here. Sneeky's economy is not improving but continues to hurt the population and the job numbers continue to be down and NOT improving! The US ‘oil and natural gas resources’ belong to the citizens of this country and are to be used by those same citizens! The price at the pump needs to go down to $2/gallon - $3, $3.50/gallon or *$4.00 is Not the new low! More Refineries are Not the answer, Stop exporting fuel is! Take care of the domestic fuel market first and above all else! Vehicle manufactures Produce and the population ‘Drives’ vehicles with high MPG, are very safe, reliable, have a ‘reasonable’ cost and a good ‘value’ for the money. The price of fuel at the pump is too high!
nb52 Champion Author Grand Rapids Posts:7,795 Points:1,549,775 Joined:Nov 2008	Message Posted: Feb 2, 2013 6:16:23 PM Ignore nb52 Report Abuse Our Maximum Leader will fix ti all....soon.
dcoxdcox44 All-Star Author New Hampshire Posts:653 Points:204,660 Joined:Aug 2011	Message Posted: Feb 2, 2013 7:27:53 AM Ignore dcoxdcox44 Report Abuse don't like the prices? do something - figure out how to use less! use public transportation carpool get a job closer to home get a home closer to work ride a bike get ride of the Chevy Subdivision (oh you need to haul your 6 kids around? Should've thought about that earlier)
the1roadhog Champion Author Atlanta Posts:9,913 Points:2,058,530 Joined:Jun 2007	Message Posted: Feb 2, 2013 4:52:52 AM Ignore the1roadhog Report Abuse High oil prices and joblessness did nothing to prevent a second term for the current Prez so voters are getting what they voted for in the majority of folks which do not include me.
wild3bill Champion Author New York Posts:2,546 Points:1,687,490 Joined:Nov 2005	Message Posted: Feb 2, 2013 4:23:36 AM Ignore wild3bill Report Abuse People who work for the Diamond Monopoly Do not VACATION in the US.If it appeared Cartel work was being done on US soil the Monopoly or Cartel employee could face serious US Federal prison time! One Hundred Years ago TheBig Oil Monopoly was broken up under Tgheodore Roosevelt. Thr reunification of former parts of the Standarf Oil Monopoly i.e. Exxon and Mobil was the beginning of out of control oil price manipulation and High Oil Prices of the last 15 to 20 years!.The FTC official who green lighted Big Oil re- Merger saying it would not lead to the price gouging we have had for fifteen years!He shoyuld have got Fredral Prison time!
Focus2 Champion Author Illinois Posts:7,896 Points:1,920,520 Joined:Mar 2006	Message Posted: Feb 1, 2013 10:27:35 PM Ignore Focus2 Report Abuse Oil plays a special role, because it is easily transported, and can be used in many situation where electricity or some other form of energy (such as human energy, wind energy, or natural gas) would not do."The above statement while true, they fail to mention that Big Energy is excited about all the natural gas finds from fracturing shale and rock. Big Energy is trying to get our government to allow them to export our natural gas to the rest of the world. They plan to liquify the natural gas for export. Cheniere Energy already can do this and has received an okay to export with others trying to get on board. They are even resorting to e-mails to the public to call congress and convince them that it is best thing for us and will create jobs etc. The real truth is, it will profit Big Energy, establish world demand market and pricing. Natural gas will rise in the USA from these actions. We need to keep our natural gas here and not be allowed for exports. It will be clean cheaper energy for consumers and business. Business that have left will have an incentive to return to America with the promise of clean affordable energy.
endymion All-Star Author New York Posts:843 Points:174,630 Joined:Nov 2012	Message Posted: Feb 1, 2013 10:08:43 PM Ignore endymion Report Abuse the producers cut supply to maintain prices and keep it in line with demand, or cut it to drive prices up.
Focus2 Champion Author Illinois Posts:7,896 Points:1,920,520 Joined:Mar 2006	Message Posted: Feb 1, 2013 9:43:08 PM Ignore Focus2 Report Abuse Ever think about the diamond industry? More and more diamonds are mined and put on the market but the price is always controlled and manipulated. You will never see cheap diamonds.
boatfloyd Champion Author Jacksonville Posts:1,733 Points:390,900 Joined:Mar 2012	Message Posted: Feb 1, 2013 9:30:15 PM Ignore boatfloyd Report Abuse With all the oil being discovered in the United States and other parts of the world, won't this level off oils and gas prices. So even though prices won't go down, they will just keep up with inflation.
Wsamson7121 Champion Author San Jose Posts:5,943 Points:2,013,495 Joined:Feb 2003	Message Posted: Feb 1, 2013 9:23:55 PM Ignore Wsamson7121 Report Abuse Nemo is right in that we can thank our dear leader for cancelling the keystone pipe line. Not looking to 4 more bad years.
granitestater Champion Author New Hampshire Posts:8,836 Points:1,432,700 Joined:Oct 2008	Message Posted: Feb 1, 2013 9:12:18 PM Ignore granitestater Report Abuse Wind, water, wood and coal fueled the Industrial Revolution. Oil did it all by itself...
Beboper Champion Author Virginia Posts:8,742 Points:2,166,715 Joined:Oct 2005	Message Posted: Feb 1, 2013 9:05:08 PM Ignore Beboper Report Abuse old news
Steve6921 Sophomore Author New Hampshire Posts:104 Points:156,980 Joined:Aug 2012	Message Posted: Feb 1, 2013 9:03:48 PM Ignore Steve6921 Report Abuse 4 more years
cheaper0ON All-Star Author Ontario Posts:998 Points:400,980 Joined:Jan 2012	Message Posted: Feb 1, 2013 9:03:46 PM Ignore cheaper0ON Report Abuse Old News.
CdnLynx Champion Author Ontario Posts:1,024 Points:525,835 Joined:May 2008	Message Posted: Feb 1, 2013 9:03:32 PM Ignore CdnLynx Report Abuse Recession? Personally I'm depressed! let's call a spade, a spade! Let's call it a depression! ;-)
JagXKR Champion Author British Columbia Posts:3,169 Points:1,094,080 Joined:Dec 2009	Message Posted: Feb 1, 2013 9:02:27 PM Ignore JagXKR Report Abuse High energy costs will always stifle or delay an economic recovery.
NemoIL Champion Author Illinois Posts:3,040 Points:1,316,145 Joined:Aug 2008	Message Posted: Feb 1, 2013 8:59:09 PM Ignore NemoIL Report Abuse We can thank our dear leader for cancelling the keystone pipe line for helping to increase oil prices here.
DustyHorse Champion Author Virginia Posts:6,098 Points:1,393,795 Joined:Oct 2008	Message Posted: Feb 1, 2013 8:57:18 PM Ignore DustyHorse Report Abuse There will be another big dip in the ongoing recession.
granitestater Champion Author New Hampshire Posts:8,836 Points:1,432,700 Joined:Oct 2008	Message Posted: Feb 1, 2013 8:55:40 PM Ignore granitestater Report Abuse The Obama administration. Turning the economy into a cesspool since 2008...
TheSnowstorm Champion Author Montreal Posts:8,634 Points:1,916,705 Joined:June 2005	Message Posted: Feb 1, 2013 8:54:27 PM Ignore TheSnowstorm Report Abuse Simply because oil is one of the few commodities that is intricately intertwined to so many other products and services, both directly and indirectly.
MDTDriver Champion Author California Posts:9,739 Points:2,158,320 Joined:Jul 2006	Message Posted: Feb 1, 2013 8:47:15 PM Ignore MDTDriver Report Abuse Recession is comming before the end of 2013
SparkieMi Champion Author Kalamazoo Posts:3,277 Points:591,330 Joined:Sep 2011	Message Posted: Feb 1, 2013 8:46:33 PM Ignore SparkieMi Report Abuse The very good post by suzmar hits the nail on the head!!!
mstearno Champion Author Dayton Posts:8,080 Points:1,734,140 Joined:Jan 2008	Message Posted: Feb 1, 2013 8:45:27 PM Ignore mstearno Report Abuse I Realize how bad and our president doesn't care nor understand
TheHermit Champion Author Maine Posts:3,404 Points:128,230 Joined:May 2012	Message Posted: Feb 1, 2013 8:43:32 PM Ignore TheHermit Report Abuse So, the outlook is bad?
OU8121959 Champion Author Grand Rapids Posts:2,719 Points:533,935 Joined:Apr 2011	Message Posted: Feb 1, 2013 8:43:31 PM Ignore OU8121959 Report Abuse really
Buddy2264 Champion Author Tampa Posts:11,669 Points:2,362,895 Joined:Oct 2005	Message Posted: Feb 1, 2013 8:43:14 PM Ignore Buddy2264 Report Abuse 1/2 of what we import we refine and then ship back out as finished fuels it seems by some reports on here in the past. Now with new US oil production we will continue to ship out more fuels, leaving our inventory low and prices high if we do not do something or switch to other fuels and energy.
SavALot Champion Author Virginia Beach Posts:8,489 Points:1,714,760 Joined:Apr 2005	Message Posted: Feb 1, 2013 8:43:02 PM Ignore SavALot Report Abuse lots of misconceptions with oil prices
1Casey Champion Author Albany Posts:6,543 Points:1,793,910 Joined:Jun 2004	Message Posted: Feb 1, 2013 8:42:36 PM Ignore 1Casey Report Abuse ?
johton Champion Author Seattle Posts:1,230 Points:315,090 Joined:Jun 2012	Message Posted: Feb 1, 2013 8:42:15 PM Ignore johton Report Abuse Yes, really big problem. Less money in my pocket.
Beaveronparade Champion Author Hartford Posts:2,109 Points:637,605 Joined:Mar 2011	Message Posted: Feb 1, 2013 8:42:11 PM Ignore Beaveronparade Report Abuse We know how big of a problem it is unfortunately. We are paying the price at the pumps.
Rednix Champion Author Miami Posts:6,173 Points:1,278,660 Joined:Jul 2009	Message Posted: Feb 1, 2013 8:40:17 PM Ignore Rednix Report Abuse They need to start pulling on the reins for these oil price increases.
rrs517 All-Star Author Colorado Posts:943 Points:347,630 Joined:Apr 2006	Message Posted: Feb 1, 2013 8:39:22 PM Ignore rrs517 Report Abuse Obama and his Energy Czar want to see $7.00 gas and have said so. So what's the surprise?
snerd All-Star Author Pennsylvania Posts:935 Points:656,750 Joined:May 2005	Message Posted: Feb 1, 2013 8:36:43 PM Ignore snerd Report Abuse No kidding...
Spankster85 Champion Author Chicago Posts:1,739 Points:359,765 Joined:Nov 2011	Message Posted: Feb 1, 2013 8:35:17 PM Ignore Spankster85 Report Abuse It's a big problem, we get it.
fowlcan Champion Author Oklahoma City Posts:2,125 Points:687,290 Joined:Feb 2011	Message Posted: Feb 1, 2013 8:33:58 PM Ignore fowlcan Report Abuse High prices are a big problem to everyone.
bvrbill Champion Author Eugene Posts:3,238 Points:521,550 Joined:Jul 2011	Message Posted: Feb 1, 2013 8:33:49 PM Ignore bvrbill Report Abuse Not good news.
tidalwave3 Champion Author Tallahassee Posts:1,311 Points:1,466,515 Joined:Jun 2008	Message Posted: Feb 1, 2013 8:33:46 PM Ignore tidalwave3 Report Abuse Sounds right :(
wshutton Champion Author Los Angeles Posts:1,682 Points:927,120 Joined:Mar 2009	Message Posted: Feb 1, 2013 8:31:47 PM Ignore wshutton Report Abuse They are not a problem for Republican speculators.
suzmar Champion Author Texas Posts:2,214 Points:874,980 Joined:Jun 2006	Message Posted: Feb 1, 2013 8:31:24 PM Ignore suzmar Report Abuse No, I think everyone except the Obama administrations realizes that high Oil prices are a problem.
BBHybrid Champion Author Pittsburgh Posts:6,474 Points:1,296,000 Joined:Aug 2008	Message Posted: Feb 1, 2013 8:29:05 PM Ignore BBHybrid Report Abuse i realize but nothing is changing
esquared Champion Author Oklahoma City Posts:8,082 Points:1,973,035 Joined:Jan 2006	Message Posted: Feb 1, 2013 8:28:40 PM Ignore esquared Report Abuse Interesting analogies, none of which actually explain the relationship between recessions and the price of petroleum.
unemployed58 Veteran Author Montreal Posts:250 Points:64,145 Joined:Oct 2012	Message Posted: Feb 1, 2013 8:28:33 PM Ignore unemployed58 Report Abuse why is everything Obama's fault....I mean c'mon, think about it!!
bginsj Champion Author San Jose Posts:1,883 Points:1,237,860 Joined:May 2009	Message Posted: Feb 1, 2013 8:25:44 PM Ignore bginsj Report Abuse now as in the past we are putting more money into our gas tanks and not spending in other places!
BREW9 All-Star Author Tampa Posts:896 Points:2,915,755 Joined:Jun 2004	Message Posted: Feb 1, 2013 8:24:11 PM Ignore BREW9 Report Abuse squeezing us
Dragnet Champion Author Arizona Posts:15,422 Points:2,911,685 Joined:Jul 2004	Message Posted: Feb 1, 2013 8:13:59 PM Ignore Dragnet Report Abuse Gas will bankrupt the American public and Obummer could care less as long as his brotherhood makes out like kings
wayoung56 Champion Author Alabama Posts:2,815 Points:821,260 Joined:Oct 2006	Message Posted: Feb 1, 2013 8:12:12 PM Ignore wayoung56 Report Abuse Good one drz614!!!
NHLiveFree Champion Author New Hampshire Posts:11,113 Points:1,625,315 Joined:Jun 2008	Message Posted: Feb 1, 2013 8:11:37 PM Ignore NHLiveFree Report Abuse How is life in Venezuela drz614? Big Oil has repeatedly played the role of the tail wagging the dog over the last century. A role its monopolists and CEOs have always relished from their view on Mount Olympus.
my2002m Champion Author Tulsa Posts:6,088 Points:1,673,205 Joined:Jul 2008	Message Posted: Feb 1, 2013 8:07:30 PM Ignore my2002m Report Abuse They can put us into another recession.