Env-Econ 101 challenge of the day: Find the flaw in the following argument from CNN.com (6 double-dip warning signs)*:
Few would argue that the chaos in the financial markets in the fall of 2008 helped send the economy into its worst period of decline since the Great Depression. But the oil price shock earlier that summer, which sent prices to a record high of more than $145 a barrel, may have had an even bigger impact on consumers.
However, as economic activity slowed around the globe, so did oil consumption, causing prices to plunge. So one positive byproduct of the recession for many Americans was a roughly 75% decline in oil prices that occurred between the July 2008 high and the end of last year.
Oil prices have been rising again this year though, due largely to hopes that the end of the global recession is in sight. While prices are not expected to test highs any time soon, there are forecasts that $100-a-barrel oil could return next year thanks to stronger demand.
Since many consumers have limited ability to cut the amount of gasoline they use, another oil shock would take away money they can spend on other goods and services. It can also raise costs for businesses, forcing them to cut back on investment and even staffing.
*Hint
