While recognizing the difficulty of identifying the reactions of consumers and businesses to higher energy prices, Chairman Bernanke has recently noted that the surge in energy prices since late 2003 probably reduced the growth of real GDP between 1/2 percent and 1 percent per year.
One important change in the economic landscape that has limited the current effect of an energy shock compared with the effects in our earlier experience is that energy costs today are not nearly as important as they were during the 1970s, when the energy intensity of U.S. production was significantly higher.