It is often said that the inflation of the 1970s and 1980s in the United States and elsewhere was caused by the two oil crises of 1973-74 and 1979-80. The first crisis was a result of the Yom Kippur War, during which Arab oil-producing nations reduced oil shipments to countries that supported Israel. The second crisis stemmed from the revolution in Iran and its subsequent conflict with Iraq, which disrupted Iranian oil exporters. Both led to significant increases in oil prices. The standard narrative asserts that the correlation between the oil price surges and observed increases in inflation was causally linked. Even though widely accepted, and often repeated, this narrative doesn’t hold water.
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