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We are in the midst of the first oil shock in the modern era of globalization. In today's U.S.-centric world, that spells unusual vulnerability. If higher oil prices take a toll on the over-extended American consumer, nations that rely on exports to the U.S. as major sources...

Author: /time Magazine | Title: A Price to Pay | 8/29/2005 | See Source »

The risk is mounting of a sharp global slowdown?and possibly a recession?sparked by rising oil prices. U.S. consumer spending is likely to slow markedly if oil prices just stay at about $60 a barrel. This is true for several reasons. First, U.S. households have precious little flexibility in...

Author: /time Magazine | Title: A Price to Pay | 8/29/2005 | See Source »

Second, just prior to the two oil-price spikes of the '70s, discretionary spending of U.S. households had become excessive?setting the stage for America's most severe consumer-led recessions. A similar overhang is evident today: spending for consumer durables and residential construction has averaged 14.3% of America's...

Author: /time Magazine | Title: A Price to Pay | 8/29/2005 | See Source »

With real (i.e. inflation-adjusted) oil prices having more than tripled since the last recession ended in late 2001, a pullback by the heretofore unflappable American consumer is a distinct possibility that would spell trouble for the rest of the world. Particularly worrisome is the possibility of a double whammy...

Author: /time Magazine | Title: A Price to Pay | 8/29/2005 | See Source »

China is the most obvious case in point. Its oil consumption per unit of GDP was double that of the developed-world average in 2004. China, like many Asian countries, tends to subsidize the price of retail energy products. While that means the blow of higher oil prices is softened...

Author: /time Magazine | Title: A Price to Pay | 8/29/2005 | See Source »

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