an isolated economic phenomenon. It largely depends on the “political economy” component, since the price of oil is affected by the production decisions of the OPEC countries and these OPEC countries may time their price increases in reaction to world economic conditions – thus complicating attempts to forecast economic behavior. While there has been a definite relation between rising prices and GDP growth, concerns of rising oil prices may not have such a tremendous effect on the economy as in the past. Oil costs have been a shrinking part of the US economy in recent years. Since 1970, energy use as a fraction of GDP has fallen by around 35 percent (Oil and the Economy, “Will higher prices mean a recession?”, March 13,2000). Even if the experiences with increasing oil prices are taken under consideration, the risk of a recession, at this point, is low. In either case, however, high oil prices fuel the risk of recession by making the economy vulnerable to other negative developments (Oil and the Economy, “Will higher prices mean a recession?”, March 13,2000). If oil prices were lower, the economy could endure other problems more easily. With high oil prices, the economy may not stand up as well to any new unexpected shocks. The current employment situation appears to be another “bright spot” in today’s economy. The unemployment rate rose to 4.1% in February but remains near its lowest level in more than three decades (Bank of America, Economic Research, Economic in Brief, November 1, 1999). Consumer expectations of the economy remain favorable and spending is strong. Wages are rising faster than inflation, allowing families to stretch their incomes further. This “gilded” image of the job market, however, has its own shortcomings as well. Despite the existing prosperity and the tightest labor markets in a generation, more workers are afraid of losing their jobs tha...
