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By James Hamilton on Mar 9, 2012 with 5 responses

Why Current High Oil Prices Won’t Derail the U.S. Economy

Here’s why I believe that the current high price of oil is not enough to derail the U.S. economic recovery.

Although the prices of oil and gasoline have risen significantly from their values in October, they are still not back to the levels we saw last spring or in the summer of 2008. There is a good deal of statistical evidence (for example, [1],[2]) that an oil price increase that does no more than reverse an earlier decline has a much more limited effect on the economy than if the price of oil surges to a new all-time high.