Someone on NPR this morning said that he thought that there hadn't been a recession this time (as opposed to 1973-1974, 1991, etc.) because the Federal Reserve hadn't assumed that inflation was going to go out of control and increased interest rates. I wouldn't be surprised if that was also a major factor. 0% interest rates for car purchases certainly helped keep things moving for quite a while.

Lots of things were happening in earlier oil price spikes that contributed to those recessions (Watergate, Iran hostages, etc., etc.). We've been "lucky" that many factors are helping to mitigate the effect on the economy this time around (especially easy money for one). While we can argue the importance of Bush's tax cuts, we can't ever really know. Color me skeptical, though.

I think that eventually $80+/bbl oil is going to do bad things to us. Whether we'll muddle along for another 6 months or 3 years, I obviously can't say. As you and others have noted, developing countries like China may be hurt more than the US if prices keep climbing.

It doesn't look like the factors keeping the price high this time around are the same as in the past - there's not additional production that's coming on like to take power away from OPEC as there was in the 1980s, and demand is rising very rapidly now.

The overall trend since late 2004 doesn't look too promising to me:

[image|http://www.bea.gov/briefrm/gdp.gif|0|Real GDP Growth in USA|472|641]

[image|http://www.wtrg.com/oil_graphs/oilprice1947.gif|0|Oil prices in constant 2006 dollars|600|800]

(Oil crossed $30/barrel somewhere in 2003-2004.)

So, in terms of the post-1973 oil price spikes, this has been an "exception" in some respects. The trouble is, as always, comparisons to the past are imperfect.

We'll see.

Cheers,
Scott.