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Why Oil Prices Are Up, and What We Can, and Can't, Do about It

Knowledge at Wharton·@HashtagPLUS·about 1 month ago
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Rising prices for crude oil and gasoline have alarmed many consumers and put President Bush and other U.S. politicians in a position where they feel they have to do something — anything — in response, especially in an election year. But members of Wharton’s finance department and private-sector economists say it’s a good time to shun hysteria, take a deep breath, and look rationally at the reasons for the price hikes and their likely effect on the economy and on energy policy. Higher prices are crimping the pocketbooks of motorists who are now paying $3 per gallon or more at the pump, up from about $1.50 in January 2003. Gasoline prices, which could continue to rise this summer, will have a ripple effect throughout the economy in the weeks and months to come and will dampen GDP (gross domestic product) growth in 2006. Indeed, a recent survey found that one group of American CEOs sees rising energy costs as the biggest threat to the world economy over the next two years.…

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