ht energy post
Steven Kopits of Douglas Westwood Energy research discusses this urgency in a new report, noting that in the last 37 years, the US has suffered six recessions. From the beginning of each, he says, oil played a central role. In every case when oil consumption breached 4 per cent of GDP, he notes, the US has suffered a recession. Indeed, he says, the current US recession began within two months of oil hitting the 4 per cent threshold, when oil reached $80 per barrel.

Kopits also notes that a sustained rise in the oil price of 50 per cent or more has always been associated with recession, and this applies to the current recession as well.

From his research, then, it seems there are three rules by which to avoid recession caused by oil prices:

Crude oil expenditures should not exceed 4 per cent of GDP.

Oil prices should not increase by more than 50 per cent year-on-year.

Oil price increases should not be so great that a potential demand adjustment should have to reach 0.8 per cent of GDP on an annual basis, as shedding demand at this rate has generally been associated with recession.