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Oil Toolkit - Symonds

Oil Toolkit - Symonds

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Rising Energy prices have not hurt the economy in the squo, CBO says
Katayama
, Graduate Student at University of California: San Francisco, 07 (Munechika, December 22,
http://econ.ucsd.edu/%7Em1kataya/paper/OilShock.pdf, 7/02/08)

Macroeconomic consequences of large increases in the price of oil have been of great concern
among economists and policy makers
, as well as the general public since two major oil-price
shocks hit the economy in the 1970's. In recent years, however, it seems that the effect of
oil-price shocks has been decreasing
. For example, the Congressional Budget Office reports
that:
Contrary to general expectations, the large and persistent rise in energy prices that has occurred over
the past two and a half years has not caused substantial problems for the overall U.S. economy.
Although many households have had trouble adjusting to the higher prices, the effects on the nation's
gross domestic product (GDP), employment, and innovation have thus far been moderate.
(Congressional Budget O_ce, 2006, p.VII)

Times have changed, oil prices no longer effect the economy
Burroughes
, Staff Writer, 07
(Tom, The Business, “Global economy takes era of high oil prices in its stride,” 9/15, Lexis, date accessed:
7/4/08)

Some analysts are predicting prices could eventually go on to hit $100 or beyond. Yet in the 1970s,
when oil prices spiked to what would now, in inflation-adjusted terms, be about $90 per barrel, there
were severe economic consequences so why haven t there been any this time round
? The reason is that
the worlds largest economies are less oil-intensive than they were. This is partly due to the rise of the
services sector and the demise of manufacturing; oil-using parts of the economy are also more efficient
.
In the 1970s, the oil sector accounted for about 8% of the world s gross domestic product; it now
accounts for about 4%, so high oil prices take a smaller bite than before.

High energy prices will not cause recession
Siegel
, Staff Writer, 07
Gary E, The Bond Buyer, “In Brief: Fed's Poole: Oil Price Shocks Need Not Lead to Recession,” 3/5, lexis, date
accessed: 7/4/08

"Members of the [Federal Open Market Committee], as well as monetary policy makers in Europe and the
United Kingdom, have spoken about oil prices and inflation on many occasions in recent years," Poole said.

"Despite differences in emphasis, a clear proposition runs through these discussions: irrespective of the
behavior of oil prices, we can be confident that monetary policy oriented to price stability will deliver
control over inflation over the medium term."
Not to say that spikes in energy prices are without impact,
according to Poole. "Without question, energy supply shocks are disruptive, but they need not create
recessions,
" he said. "Indeed, there is a more general lesson from experience with oil price shocks.
Monetary policy should not allow an economy to operate at the edge of a cliff. When balanced
precariously at the edge of a cliff, even a minor disturbance, oil or otherwise, may be sufficient to push
the economy over the edge. Although an outside shock may be the catalyst, or trigger, that creates
undue inflation pressures, the fundamental problem is not the catalyst but the powerful and risky brew
of an overheated economy."

Gonzaga Debate Institute 2008

134

Lacy/Symonds/Bowen

Oil Toolkit

A2: High Oil Prices hurt the Economy (2/3)

No risk of economic impact from high oil prices – increase in incomes prove we are actually
spending less on oil now then 20 years ago
Zakaria
Staff writer ‘08
Fareed, Newsweek, “Why We Can't Quit; Even at $100 a barrel, oil is still cheaper than a
Starbucks latte.” 3/24/08 Proquest.com Accessed: 7/4/08

I think that's been a huge surprise to everyone. I remember meeting with government officials when oil
was heading towards $25, and they thought economic disaster was around the corner. They thought the
same thing at $50 and $75 a barrel. The reason we've withstood the increase is that consumer income
has grown faster than energy expenditures have. We spend about 6 percent of our income on energy,
down from 8 percent 20 years ago.
Energy just isn't the largest or most important item in our personal
spending. Even after the recent price increases, gasoline is still two times less than the cost of Evian water,
and 10 times less than a Starbucks latte.

The economy is going to remain solid through this oil shock
Dechaux
, Staff Writer, 07
(Delphine, Herald Sun, “Less damage in third 'oil shock',” 12/5, Lexis, 7/4/08)

THE world is enduring a third ''oil shock'' as crude prices trade at record levels close to $US100 a
barrel
after a sustained surge over the past three years, according to economists. But unlike the oil shocks
of 1973 and 1980, this time the global economy remains solid
, even amid the added threat of the US
housing crisis. ''There is no doubt we are in the third oil price shock,'' said Leo Drollas, chief economist
at the Centre for Global Energy Studies in London. ''Because since 2004 . . . prices have gone from $US30
to almost $US100
.'' OPEC ministers meeting in Abu Dhabi today to decide on output quotas for the cartel
argue that the oil price spike does not reflect the supply-demand situation. Rather they believe prices have
surged because of geopolitical concerns, such as that over Iran's nuclear program
. In the run-up to the
1980 oil shock prices had more than doubled. Francois Lescaroux, an economist at IFP, a French state-run
energy research body, said majority opinion was that the first two oil shocks were due to supply factors.
''Everyone agrees this time that demand factors are pulling up prices,'' he said. The oil price shock of 1973
occurred after Arab members of OPEC halted shipments of crude to the United States, Western Europe and
Japan for their perceived support of Israel in its battle against Syria and Egypt during the Yom Kippur War.
Following the oil embargo, the price of crude jumped above $US10 a barrel for the first time. The second oil
crisis, in 1979, followed the Iranian Revolution. By the start of 1981, oil prices had surged to $US39, which,
adjusted for inflation, is the equivalent of $US101 a barrel today. Yahia Said, a professor at the London
School of Economics, said political unrest was a common factor in all three oil shocks. ''In the first case, it
was the Yom Kippur War of 1973, in the second case it was the Iraqi invasion of Iran (after the Iranian
Revolution). In this case it is tensions around Iraq and Iran,'' he added. ''The shock this time has not had
the same negative repercussions in terms of inflation or in terms of recession. ''It means that the
economies as the result of the previous two shocks have managed to reduce the impact of high oil
prices, especially in developed countries,''
he added.

Gonzaga Debate Institute 2008

135

Lacy/Symonds/Bowen

Oil Toolkit

A2: High Oil Prices hurt the Economy (3/3)

Empirically proven that high oil prices DO NOT hurt economic growth.
McKillop
, energy economist and consultant, 04
(Andrew, Energy Pulse, “High oil prices do not hurt economic growth,” 11/24,
http://www.energypulse.net/centers/author.cfm?at_id=599, date accessed: 7/2/08)

The often repeated but unproven claim that ‘High oil prices hurt economic growth’ is also lacking the
proof of its logical corollary
, i.e. that “Low oil prices favor economic growth”. The fast fall in economic
growth rates in all OECD countries following the ‘liberation’ of Kuwait in 1991, which most certainly helped
Bill Clinton to massively defeat G. Bush-1 in the US presidential elections of 1991, was accompanied (and in
fact driven) by fast falling oil and energy prices. In any case, cheap oil, in 1991, led to no spontaneous
upsurge or recovery in US or other OECD country economic growth. Before this non proof of lower oil
prices ‘aiding’ economic growth, the very large oil price falls of 1985-86 did not lead to faster economic
growth in any major OECD country
through 1986-88. Conversely, the ‘Baghdad Bounce’ so often
predicted by business and finance ‘experts’ for the US and world economy in the run-up to the US and UK
invasion of Iraq in 2003 was most certainly upward - for oil prices. Economic growth rates, already at high
levels in South and East Asia, were either unaffected by, or marginally increased by the economic
context in which oil prices bounced upward, and continued bouncing upward as Iraq descended into
chaos. From early 2004, with continuing and strong growth of the oil price, the ‘trickle down’ effect of
higher oil, gas and ‘real resource’ prices began to take effect. Since early 2004 economic growth rates
in most world regions,
including Europe, Africa and Latin America, have been repeatedly re-estimated
upwards by the European Commission, OECD and IMF. In addition and for about 4 months from late 2003,
even the erratic US economy showed some signs of ‘vintage’ economic growth, before falling back to lower
and more hesitant trend rates of about 3.75% to 4.5% annual in mid-2004.

Gonzaga Debate Institute 2008

136

Lacy/Symonds/Bowen

Oil Toolkit

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