Title: Why Oil Prices Are Up, and What We Can, and Can't, Do about It - Knowledge@Wharton
Headings: Why Oil Prices Are Up, and What We Can, and Can’t, Do about It
Finance
Why Oil Prices Are Up, and What We Can, and Can’t, Do about It
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Content: But there’s a large demand component today. The U.S. and China have increased their demand for oil and that has bid up the price. If it’s a demand-side increase, that means the economy has momentum. A demand-side increase in price may temper our growth but not stop it.” Souleles also notes that while today’s oil and gasoline prices are high in nominal terms, they are, in real terms, close to, or even below, their 1980s peak. “ A dollar isn’t worth as much today as it was 20 years ago,” he says. “ Oil prices have not risen as much as people think in real terms. Our overall demand for oil can still rise. But the economy is more fuel-efficient than it used to be and the increased role of the service sector means we need less oil to produce each unit of GDP. My sense is we might be using half as much oil per unit of GDP now [than in the 1980s].