Elasticity contradictions

If a global oil shock reduces supply 10%, the price of crude will rise to $20,000/barrel, with fuel expenditures consuming more than the entire GDP of importing nations.

At least that’s what you’d predict if you think the price elasticity of oil demand is about -0.02. I saw that number in a Breakthrough post, citing Kevin Drum, citing Early Warning, citing IMF. It’s puzzling that Breakthrough is plugging small price elasticities here, when their other arguments about the rebound effect require elasticities to have large magnitudes. Continue reading “Elasticity contradictions”