The oil shocks don't just make the economy feverish, they also sap its strength. Money that would go into new investment or consumer spending at home is instead pumped out to foreign oil producers or drained into government fuel-tax coffers. In other words, it's outside the normal economic model. We've been here before. Iraq's 1990 invasion of Kuwait produced another oil shock and the recession that helped defeat George Bush.
Oil is dangerous stuff.
It destroys presidents and prime ministers. Although the United States so far has avoided the panic that is sweeping Europe, this crisis is drifting toward America like a fall hurricane, just visible now on the radar far across the Atlantic. Politicians rage at their powerlessness in times like this, and they're tempted to offer the public a quick fix that distorts the market and offers the illusion of control. But they're forgetting the one overwhelming lesson of the 1970s. The market really is the best discipline for this political commodity.