Did Last Summer’s Oil Spike Cause The Recession?

That’s the startling conclusion of a new paper by economist James Hamilton of the Brookings Institution. Derek Thompson of The Atlantic reviews it here (and in this case, the comments are worth reading).  To Texas, oil increases are a double-edged sword. We benefit hugely from increases in oil prices, because our investor class is historically tied to oil and because higher prices spur new activity that increases employment. The other side, of course, is that we are consumers like other Americans, and higher prices at the pump mean less money for consumption on other goods and services. Hamilton’s thesis has its problems, but it also raises a lot of pertinent questions. Perhaps the federal government should turn its attention to why oil soared to $180 a barrel when oil investors were saying the “natural” price of oil should be $50 a barrel.