Newswise — “There is no question that higher oil prices would put a damper on what recovery we are currently experiencing, but it is also important to note that a rise from current levels of $3.17 a gallon to $3.75, while painful, isn’t huge in percentage terms. Even a rise to $5 - which could be quite painful in the short run and would indeed retard growth - is only 25 percent higher than the $4 levels we experienced in previous peaks.
“In the longer run there is both good news and bad news: The good news is that even though governments may be unstable in the Middle East, they will need the money so they will continue to export the oil. Thus, barring any concerted effort to wreck oil infrastructure such as what has occurred in past Gulf wars, any new government will resume production in short order if it even gets interrupted at all.
“The bad news is that we are looking at a long-term rise in oil prices regardless of these short term perturbations. Particularly in any scenario where global economic recovery sparks additional demand, we are likely to see upward trends in oil prices into the future.
“The moral of the story is that we, as a nation, should take steps to cushion the foreseeable effects of higher oil prices. We will be glad we did when oil prices eventually surpass even levels that right now make us all unhappy.”
--Steven Kyle, a professor at Cornell University’s Dyson School of Applied Economics and Management.
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