Why Aren’t Rising Gasoline Prices Killing the Economy?
by Joseph A. Monaco, Ph.D. According to the U.S. Department of Energy, it was two years ago this Memorial Day weekend that the average price of gasoline in the United States topped $1.80. The media was rife with stories about how this would “slow down the fragile economic recovery” and would most likely throw us back into a recession if and when gasoline ever hit $2.00 per gallon. Well, this week I filled up my car at a cost of $3.13 per gallon and the U.S. economy is rockin’ and rollin’ as strong as at anytime since the late 1990’s. And now the consensus is that if gasoline ever hit that same $2.00 price, it wouldn’t thwart our economy’s growth, but rather send it flying. This raises the obvious question of, “What Gives?” To answer that question, it would be helpful if we first explained why people are predisposed to thinking that rising energy prices will result in a recession. It’s because people typically presume that “past is prologue.” In other words, “whatever happened the last
