To start with, the difference in today’s economic performance and that of earlier periods might, in part, be related to the different size and nature of the shock. The more than doubling in oil prices – though comparable in scale to earlier oil price shocks – has taken more than two years to unfold, much longer than on previous occasions.
Moreover, unlike its predecessors, the present price hike is explained by substantially different factors. Shocks in the 1970s were caused mainly by sizeable disruptions to the oil supply, which seriously dampened the confidence of companies and households. Now, there is a variety of factors.