Santorum: Rising Gas Prices Led to Recession

on February 28 2012 10:07 AM
Rick Santorum rising gas prices
Rick Santorum offered a unique theory to what caused the recession: rising gas prices. Reuters

Rick Santorum offered a unique theory to what caused the recession: rising gas prices.

At a campaign stop in Lansing, Michigan on Wednesday, the GOP presidential hopeful said it was high costs at the pump, not just the sketchy Wall Street trades and resulting collapse of the housing market in 2008, that led the economy into a slump.

We need to look at the situation with gas prices today, Santorum said, according to CNN. We went into a recession in 2008 because of gasoline prices. The bubble burst in housing because people couldn't pay their mortgages because they were looking at $4 gasoline.

Look at what happened. Economic decline, the former Pennsylvania senator continued. Here we are again. Trying to struggle out of a recession with Barack Obama and the federal government on the backs of business, not letting them grow. And now we have energy prices again, why? Because of government policy.

Santorum later clarified his statement to reporters, saying he meant gas prices was a factor in the crisis and not the cause.

Most economists attribute the economic recession to a combination the 2008 financial crisis and collapse of the housing market. A 2010 paper by James Hamilton, however, argues that most post-World War II recessions were always preceded by the sharp increase of oil prices.

The Washington Post's Brad Plumer argues that although Santorum may be on to something, the timing is not on his side--the recession officially started in 2007.

Fortunately, there are a few differences between our current situation and 2008, Plumer wrote. Oil prices may be high these days, but this isn't a sudden upward jolt - prices were high for much of 2011. Researchers at the Stanford Energy Modeling Forum have found that the economy can adjust to steady, gradual increases in the price of crude better than wild swings.

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