Many folks see silver linings to this slowdown. Potential home buyers would cheer for lower interest rates. Employers wouldn’t mind a little fewer bubbles in the job market. Many consumers seem to have been influenced by stock-market swings, which investors now view as a necessary ingredient to a sustained boom. Diners might see an upside, too. Getting a table at Manhattan’s hot new Alain Ducasse restaurant used to be impossible. Not anymore. For that, Greenspan & Co. may still be worth toasting.
Why can many people see “silver linings” to the economic slowdown?
Yet there are good reasons to expect the economic consequences now to be less severe than in the 1970s. In most countries the cost of crude oil now accounts for a smaller share of the price of petrol than it did in the 1970s. In Europe, taxes account for up to four-fifths of the retail price, so even quite big changes in the price of crude have a more muted effect on pump prices than in the past.
Rich economies are also less dependent on oil than they were, and so less sensitive to swings in the oil price. Energy conservation, a shift to other fuels and a decline in the importance of heavy, energy-intensive industries have reduced oil consumption. Software, consultancy and mobile telephones use far less oil than steel or car production. For each dollar of GDP (in constant prices) rich economies now use nearly 50% less oil than in 1973. The OECD estimates in its latest Economic Outlook that, if oil prices averaged $22 a barrel for a full year, compared with $13 in 1998, this would increase the oil import bill in rich economies by only 0.25-0.5% of GDP. That is less than one-quarter of the income loss in 1974 or 1980. On the other hand, oil-importing emerging economies—to which heavy industry has shifted—have become more energy-intensive, and so could be more seriously squeezed.
We can draw a conclusion from the text that.
[A] oil-price shocks are less shocking now
[B] inflation seems irrelevant to oil-price shocks
[C] energy conservation can keep down the oil prices
[D] the price rise of crude leads to the shrinking of heavy industry