Sovereign Debt Crisis or Oil in the Euro Area Recession of 2011-13

Conventional wisdom (sovereign debt crisis and austerity measures) or oil as cause? Steven Kopits says oil:

The cause of a brutal recession in Europe during Q4 2011 – Q1 2013 remains unexplained in policy circles. Or more precisely, the proposed explanation is less than compelling. …  oil prices once again returned to high levels, with Brent regularly in the $100 – 115 range. With this, oil consumption in both the US and Europe began to decline, and such declines in oil consumption due to high prices — normally characterized as an oil shock — invariably leads to recession. … to suggest a Greek financial crisis could cause a recession in Europe is not entirely convincing. Greece’s GDP is all of 2% of that of the EU. It would be like a financial crisis in Indiana taking down the US economy. Conceivable, but it does not jump out at you.

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Remarkable Things People Say

In this case, one person. Steven Kopits writes:

4. The US is immune to an oil shock on paper as we are ostensibly energy independent in oil. We’ve seen this play out before. US oil consumption declined from June 2011 to December 2012 — 18 months — without the US falling into recession, something which is historically unprecedented in modern times. By contrast, Europe fell into a steep recession during this period — Q4 2011 through Q1 2013.

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