ENERGY INDEPENDENCE ON THE HORIZON - The Power Surge: Energy, Opportunity, and the Battle for America's Future - page 70

might otherwise rise more. Anything much beyond that, though, seems
unlikely, at least in the long run.
Still it's tough to be too coni dent. Oil markets are ot en as much
about politics as economics, and predicting future political twists and
turns should be done with care.

T his doesn't mean, of course, that people will (or should) stop try-

ing. Economic analysts, worried about the health of the economy,
constantly try to predict whether the price of oil will go up or down.
Between January 2007 and July 2008, oil prices rose from about $50
a barrel to nearly $140. With the United States consuming about ten
million barrels more oil than it produced every day, this meant consum-
ers were spending nearly a billion dollars a day more than before on
imported oil. Economists would later discover that the economy had
entered a recession in December 2007. Jim Hamilton, long a leading
analyst of oil and the U.S. economy, would conclude in a much-cited
paper that the oil spike helped do it in. For those with memories of
the recessions that followed rising oil prices in 1973, 1979, and 1990,
this was bad news once again.
It also reinforced a popular perception. The United States
depends on imported oil, so when prices rise, it's forced to ship
money overseas, sucking life out of its economy. If it produced
its own oil, though, this would no longer be the case. Instead of
sending money abroad, consumers would now be handing it over
to American producers; the two sides of the ledger would cancel
out. Whatever rising supplies meant for oil prices themselves, mov-
ing toward self-sufficiency in crude production would insulate the
United States from the worst effects of expensive oil. If the United
States could go so far as to produce all the oil it consumed, it would
become energy-independent.
It's a seductively simple picture of how oil af ects the U.S. economy,
with a similarly straightforward resolution; but unfortunately, it doesn't
hold up. h e i rst clue as to why comes from digging deeper into the his-
torical record. It turns out that all but one of the twelve U.S. recessions
since World War II were preceded by spikes in the price of oil. 39 h is
includes recessions that began in 1948, 1953, 1957, and 1969—all years