Understanding Oil

There's a great and lengthy essay over on Econbrowser about the factors underlying the price of oil.

Econbrowser: Well then, would $100 a barrel worry you?

In my opinion, the key question as to whether an oil price increase would push the economy into a recession remains the context of the price change. The oil price increases over the last few months were not associated with any actual disruption in petroleum supplies, and do not have the same potential to change consumer sentiment and spending patterns as dramatically as occurred in many of the earlier historical oil shocks. For this reason, even if oil does go above $100, my biggest concern remains the housing sector and financial problems.

I'm not saying there's anything to feel good about in Econbrowser's essay, but there's a good sense of perspective that's worth absorbing.

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