On Monday, presidential candidate Rick Santorum made the case that rising gas prices were among the causes of the 2008 financial collapse and resulting recession.  Since, various liberal commentators ranging from ThinkProgress to Ed Kilgore of the Washington Monthly have ridiculed Senator Santorum’s position.

The critics are wrong.  The rise in gas prices in 2007 and 2008 were in fact a contributing factor in the mortgage and financial crisis that produced the current recession. America’s dependence on oil is not only one of the nation’s leading threats to our air, water, public health, and climate, it is also one of the leading threats to our economic recovery. 

In fact, every spike in oil prices since 1973 has been followed by a recession.  Because 94% of American transportation is powered by oil, when prices go up there isn't a lot that the average person can do to reduce the amount they consume.  As a result, increasing oil prices come straight out of our paychecks.  That makes it harder for people to go to restaurants, buy new goods, and of course, to pay their mortgages.  James Hamilton of the University of California-San Diego has done some of the leading work documenting the strong relationship between oil prices and economic recessions (see here).  Likewise, NYU economist Noriel Roubini predicted g the oil supply crunch of 2007-2008 and the impact it would have on the macro-economy as early as 2004 (here).  

The real question for Santorum is not whether he is correct that rising oil prices harm our economy - he is - but whether Santorum actually has a plan to do something about it.  In reality, the price of oil is being driven by exponential growth coming from developing nations - according to leading estimates from organizations like the IEA, rising demand for oil from countries like China and India will require us to find 2 new Saudi Arabias between now and 2030.  There is no way that increasing domestic drilling, or increasing our dependence on oil from Canada's tar sands, could put a significant dent in those oil prices.  

In fact, the only way we can reduce our vulnerability to oil price shocks is to reduce the amount of oil we consume, through increases in fuel efficiency, new technologies such as electric vehicles, and more transportation choices such as mass transit.  If Senator Santorum is serious about confronting the very real crisis of our dependence on oil and the impact of oil dependence on middle class families throughout the nation, we hope that he puts together a serious proposal to reduce our consumption of oil by investing in efficiency and clean energy.

 

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