Economics, 3rd Edition

4) Oil turns out to be far 

more important than most 

economists had assumed. 

The 

Energy Information Adminis 

tration 

estimates that petroleum purchases 

make up just 3.5 per cent of the US 

economy. Looked at from that angle, 

expensive oil shouldn’t do too much 

damage. But, the IMF authors note, 

several books and articles have 

pointed out that this understates 

how crucial oil is to the functioning 

of a modern economy. Many key 

technologies contain materials or 

use fuels derived from crude.

If, in fact, oil is much more 

important than many economic 

modellers have assumed, then the 

blow to growth from even a modest 

plateau in oil could be quite large –  

lowering growth rates by up to 

1.2   percentage points over the next 

two decades.