This paper offers a plausible explanation for the close link between oil prices and aggregate macroeconomic performance in the 1970s. Although this link has been well documented in the empirical literature, standard economic models are not able to replicate this link when actual oil prices are...

We show that dependence on foreign energy can increase economic instability by raising the likelihood of equilibrium indeterminacy, hence making fluctuations driven by self-fulfilling expectations easier to occur. This is demonstrated in a standard neoclassical growth model. Calibration...

Economic shocks are not always negative. Indeed, this article suggests that the energy extraction industry is experiencing a positive shock caused by two new technologies - three-dimensional imaging and directional drilling. Combined, these techniques have lowered the net extraction costs of oil...