The end of the oil crisis: for good and bad the earthquake has occurred; the tsunami is underway.

• Author: Verleger, Philip K., Jr.

As a professional economist, I have been researching, writing, teaching, and speaking on energy issues for forty-one years. The first oil shock occurred roughly a year after I entered professional life. The oil price surge from $3 to $10 per barrel changed my career. For the next four decades, I watched as oil prices ratcheted higher and higher, strangling one industry after another while increasing hard ship across the globe for those who could least afford the pain.

For forty years, rising oil prices have forced individuals, countries, and companies to make economic adjustments they preferred not to make. Auto firms had to redesign engine systems to economize on fuel use. Airplane manufacturers devoted countless hours and billions of dollars to build lighter fuselages for the same reason. Individuals have had to divert effort and income from important activities such as educating or feeding their families in order to purchase fuel. The list goes on and on.

The adjustments were made first because fuel prices kept increasing, and second because the elites kept warning that global oil and natural gas supplies were finite. The received doctrine was that scarce resources (capital) must be reallocated from activities such as constructing schools and roads to energy conservation and production projects of questionable economic merit. The citizens of many countries were told that living standards would at best increase very slowly and at worst fall because fossil fuels were scarce and prices would keep rising. Proponents for these views still exist today. Economist Jeff Rubin published The Big Flatline: Oil and the No-Growth Economy in 2012. In it, he predicted that continually rising oil prices would doom the U.S. economy.

In his book, Rubin warns of America's poor prospects. His thesis is that world oil prices must rise given the consumption growth in China and other parts of the world. The higher prices will, he asserts, sap the U.S. economy and flatten growth. He envisions a future of energy scarcity that will alter the world we know, saying "We might find ourselves in that world of no growth much sooner than we ever could have thought."

Rubin, a Canadian, seems to relish the potential problems facing the United States. He describes a zero-sum world where China grows at America's expense.

He entitled one chapter "Why China Can Afford Triple-Digit Oil Prices While America Can't." He suggests that the crude price rise will make gasoline too expensive for Americans and precipitate an economic slowdown. He also asserts that Americans have "closed their eyes" to growing global consumption:

In a zero-sum world, if Chinese oil consumption doubles over time, the number of barrels going to the United States could be chopped in half (or something close) since the energy pie is only so big. It's a simple notion that will soon become a stifling reality for the United States and other OECD countries. If oil is the fuel that drives economic growth and oil consumption is a zero-sum game, then so is economic growth. Ultimately, that might be all the reason China needs to abandon its cheap yuan policy and turn its back on U.S. Treasuries. Rubin's book is rife with unsupported claims and outfight mistakes. Still, he illustrates the views of many who see dismal prospects for the United States.

Another such view comes from Robert Gordon, one of the world's experts on productivity. In a 2012 article, "Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds," Gordon lays out a plausible and troublesome case for why the United States may face a period of much lower growth. He notes that historically the United States benefited from three industrial revolutions. (His analysis focuses solely on America.) The first occurred between 1750 and 1830 with the invention of steam engines, the cotton gin, and railroads. The second and most important took place between 1870 and 1900 when indoor plumbing, electricity, and the internal combustion engine were introduced. The third began around 1960 with the advent of computers.

The first and second revolutions had "tails" that lasted decades as the economy transformed. For example, the impacts of the second revolution were still being felt between 1950 and 1970 as refrigeration and air conditioning use spread across the country.

The computer revolution, on the other hand, had a surprisingly short lifespan, according to Gordon. He argues that most invention has focused on entertainment and communication devices rather than on improving productivity or driving down costs.

Absent the latter development, Gordon suggests, growth in U.S. real consumption per capita, which reached 2.5 percent around the turn of the last century, could easily slump to around 0.2 percent per year going forward. He warns that faltering innovation will confront six "headwinds."

Gordon's and Rubin's views reflect thinking that has dominated macroeconomics for forty years. The "oil shock" of 1973...