With Oil Prices So High, Why Don't We Have A Recession?

Posted by: Bruce Nussbaum on May 1, 2006

Conventional economic wisdom says that with oil prices spiking up into the $70-$80 a barrel range, we should be having a recession. Oil acts as a huge tax and it is sucking out buying power from consumers and purchasing power from businesses (JetBlue would be buying more planes if it didn’t have to pay so much for fuel). But the economy continues to power on. What gives?

I would venture to say that innovation is making the economy ever more energy-efficient in a million different ways that we do not see. Productivity growth continues to soar at record levels and this week the government will report a gain of close to 3% for the first quarter. Yes, productivity growth did drop late last year but that decline is turning out to be an anomaly. Over the past five years, productivity has been exceptionally strong. It was strong in the late 90s as well.

It’s no accident that companies have been focussing on innovation in this same 10 year period. And not just product and service innnovation but business model innovation as well. The plug-and-play network system of organization, in an indirect and weird way, is very energy efficient. The Treo and Blackberry systems, in an indirect way, are very energy-saving—and very productivity-enhancing.

Think about it.

Reader Comments

Bonnie Alexander

September 6, 2007 10:13 AM

Sorry, but in our small town in Florida where I own a business that did 2.2 million last year the
common man on the ground is in a recession.
There is no where to go and nothing to do with out gas. People are running, or should I say staying home, when the prices are so high. Low income people can't afford food or gas. People with opinions that we are all fine are reading numbers. I read and see the common man and small business in my area. NO one is driving and small mom and pop restaurants are closing one day a week due to the fact that people on a fixed income are not spending. WE are in a recession in our small town of Inverness Florida. Don't look at the big picture up where the big money guys are at, look to the common man and women that spend money that fuel this society. My business is off at least 35% as well as all the other business I use in my profession as a Body Shop owner. Our paint suppliers,parts and independent subcontractors are dead now. The building business is almost non existant due to prices of gas and the new higher impact fees our county has bestowed upon us in 2007. Sir, I know that we are in a recession no matter what the numbers tell us. Respectfully, Bonnie Alexander, Inverness, Florida.

karen canales

November 5, 2007 5:35 PM

WE ARE DEFINETELY IN A RECESSION!!!! I own a mechanic shop for truckers in Miami florida and the trucking industry is going down the drain and so am I. With diesel at $34.40 gal how can I move my mobile repair units without charging at least $100.00 to move it...the truckers are expected to move their trucks for 85 cents a mile...that is disgraceful!! Sure Bush is fine...he still makes his money whether he does us good or bad. Somthing has to give or there will be no more small businesses left and the BIG people win again....

Pedro Talavera

November 20, 2007 11:26 PM

Karen. Hello.Good points. I also work as a mobile car repair. I have felt the recession, even tough they don't say it is happening.Something has to happen. The rich will get richer...that's for sure.
Pedro.
www.1mobilerepair.com.

Zane Safrit

June 7, 2008 5:42 PM

Wow. What a difference a month makes? Oil's over $130 a barrel and 49,000 jobs were lost in May alone.

People better start using their blackberry's more...or we might be in a recession.

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About

Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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