Energy Prices and the U.S. Economy in 1979-1981

Abstract

For the second time in the decade, the U.S. economy is absorbing a large sudden shock in the world price of oil. From late in 1978 to June 1979, OPEC raised the world price of oil by close to $9 per barrel. Western industrial nations could face a repetition of the serious recession of 1974-75 on close to the same scale. The increase in the total cost of energy inputs induced by this oil price increase is about two-thirds of the increase in 1974. The potential disruption to the U.S. economy and others is a similar fraction of what occurred in the earlier episode.