Economics, 3rd Edition

2) Oil production grows at a 

 

slower rate, but the world ada-

pts fairly easily. 

In this scenario, 

oil production declines, but countries 

start switching to electric cars or 

fuelling their vehicles with natural 

gas. Vehicles and manufacturers 

become more efficient. In economist 

terms, the ‘elasticity’ of demand 

quickly increases.

Under this scenario, the United 

States and Europe take just a 

small hit to growth, about 0.1 to 

0.2   

percentage points per year. 

Japan and Asia actually get a boost 

to their economy, since they can 

adapt to higher oil prices and export 

more stuff to oil-producing countries 

in the Middle East. All told, this is a 

fairly happy outcome.