Jim Hamilton of UCSD wonders why we are not in recession:
Econbrowser: 2005: the oil shock that didn't bite? : All but one of the recessions in the United States since World War II have been preceded by a dramatic increase in oil prices. Did we escape unscathed in 2005?... Historically, the big economic effects of oil price shocks seem to come when there are sudden shifts in the pattern of spending, for example, if consumers stop buying the kinds of cars that the U.S. auto manufacturers are relying on for sales. This response by consumers involves not just the price of gasoline, but also their overall perceptions of the source and likely persistence of the price changes along with expectations about the consumers' own income prospects. I argued that the nature of the response of American consumers to gasoline prices changed in the late summer and early fall, when we saw a dramatic decline in consumer confidence and profound shifts in American vehicle purchases. The loss in consumer confidence has fortunately proven to be relatively short-lived.... And how about autos?... American SUV's had done quite well in June and July in terms of number of units sold thanks to company incentives.... The intertemporal effects of these incentives makes it difficult to judge just how dismal were the September through November sales figures. December sales were back to mediocre....
Another way in which historical oil price shocks may have contributed to economic downturns is through the response of the Federal Reserve to the shocks. Thinking they have to fight the inflation, the Fed has often raised interest rates in response to an increase in the price of oil. Even if the Fed quits now with its rate hikes, we could see a significant economic slowdown in 2006 as a result of the actions the Fed has already taken.
Did we dodge the bullet of the 2005 oil shock? Perhaps yes, but I would say that it's too early to tell for sure.