Are there any macroeconomic benefits to higher oil prices?
Higher oil prices have many complex implications for the world economy. Let me just take one, which may seem paradoxical: The increase in the price of oil helps finance the U.S. current account deficit. The reason is that oil producers know that oil revenues will not last forever, so they save a good part of those revenues. Not having great investment opportunities at home, they are eager to lend outside their country, and, in particular, to lend to the U.S. Such willing creditors allow the U.S. to continue to borrow abroad and to run a large current account deficit. Were it not for oil-producing countries, the demand for U.S. assets would be smaller, and the dollar would be even weaker than it is today. Q: What if oil-producing countries suddenly took their money out? A: The dollar would plunge. But so would the value of their dollar investment, so they are very unlikely to use this tool/threat. Q: Will the price of oil keep going up? A: I truly have no clue–despite talking to many o