GoodFuels

Oil prices and economy linked?

In a 2005 paper entitled “Oil and the Macroeconomy“, James Hamilton of the Department of Economics at the University of California, San Diego, drew a parallel between oil prices and economic recession.

“Nine out of ten of the U.S. recessions since World War II were preceded by a spike up in oil prices,” Hamilton begins his paper. He goes on to discuss the complicated economic theory behind why this has occurred.

That was in 2005, before oil hit $148 a barrel. Now we find ourselves in what many are calling the deepest recession in the last 70 years.  The only way we can mitigate the impacts of volatile world oil prices is to use something else, like ethanol.  Every gallon of domestic renewable fuel we use is one less we must obtain from the world market.  3 billion cars will soon be on the world’s roads and competition for fuel will be fierce.  The time to develop renewable alternatives is now, lest we risk continuing this cycle of oil price spikes and economic collapses.

Click here to read Hamilton’s paper.

photo by newbirth