June 17, 2008

Effects of High Oil Prices on the US economy

Oil prices are at an all time high and the topic of conversation from the halls of Congress to dinner tables across America. Oil costs more than $125 per barrel, and some are predicting it to be more than $200 within the year. Families across the country are feeling the pressure do to the resulting record prices for gasoline and increase in the cost of food. What is driving the increase in prices and how is it affecting the global macro economy?

Demand for oil is at an all time high, and oil production is running near full capacity. The world does not currently seem able to produce enough oil to meet the rising demand. Even while Western nations are trying to cut back on their oil consumption, developing nations such as China and India are developing and are demanding more and more oil. This is not the first time such an astronomical oil price spike has occurred to the American economy, and yet it was able to recover then. However, this price spike might be fundamentally different than the previous ones, and therefore may have new implications for the American and the world economy.

To address these issues, the Mercatus Center at George Mason University is pleased to feature Dr. James D. Hamilton, Professor of Economics, University of California, San Diego