Oil prices did spike to triple-digit levels in early 2008, then drop sharply. But think about the fact that right now, with the world economy still seriously depressed, oil is at $80 a barrel. This suggests to me that high oil prices are largely caused by fundamentals.

And it also suggests that resource constraints will be an issue if and when we do get a full recovery.

via krugman.blogs.nytimes.com

In my presentation on the potential effects of carbon pricing in Ohio yesterday, I made* the following points:

1) Any type of carbon pricing will result in disproportionate economic impacts on states heavily invested in coal-fired electricity generation, manufacturing and transportation and warehousing.  
2) As such, it is tempting to conclude that states heavily reliant on coal-fired electricity generation, manufacturing and transportation and warehousing should oppose any carbon pricing policy.
3) But, if basic economics is right, fossil fuel prices will rise eventually--even in the absence of policy.
4) The relevant question for states like Ohio then becomes: How best to design economic policy to ensure long-term economic sustainability of states disproportionately reliant on carbon intensive production

Seems like Krugman would agree.

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