Conventional wisdom is that a slowing economy will mean lower energy prices. Unfortunately, this silver lining is not always found inside the recession cloud. In the past five recessions, the price at the gas pump went down twice, went up twice, and in one case—during the first President Bush's administration and the Gulf War—soared briefly before ending the recession essentially unchanged. Based on historical data from the U.S. Energy Information Administration, here's what happened to regular gasoline prices:
November 1973 to March 1975: up 28 percent
January 1980 to July 1980: up 12 percent
July 1981 to November 1982: down 7 percent
July 1990 to March 1991: down 0.2 percent (after a 21 percent surge)
March 2001 to November 2001: down 13 percent
Energy consultant Joseph Stanislaw, a senior adviser to Deloitte's Energy and Resources Group, told me to remember the global factors at work, when I asked about the chances that oil prices would fall this time if we dip into a recession: "It's possible. I think what goes up does come down. But I think for a while we're looking at higher prices. We may well have recession here. But Chinese oil demand is still going up. Indian oil demand is still going up. And it would be hard to imagine that Chinese oil demand is not going up this year. We've got the Olympics, huge infrastructure development, and they want this to be a big hit.
"So it may well be [the United States] is not going to go up [in demand]. Europe might not go up. But China and India are going to go up 500,000 to 600,000 barrels per day, together. So, the U.S. goes into recession. Will the price of oil collapse? Probably not."
With oil recently trading at around $90 per barrel, Stanislaw thinks it is unlikely it will drop to $20. However, $70 is more likely, and $50 is possible "if we have a real recession." However, he adds, "Don't forget we use oil primarily for transportation fuel. Will the consumer actually stop driving the car? How much of it is discretionary? And how much is that they have to drive?"