The EU, had back-to-back recessions in the 2008 to 2013 stretch.

After the first recession in 2008/9, the EU recovered, but not to pre-recession levels. Instead, it fell back into the stiff recession of Q3 2011-Q1 2013. This recession requires an explanation, and only two sources have been suggested: an oil shock and an interest rate hike.

The rate hike recession was suggested by, among others, economist Scott Sumner, who argued that a 25 basis (0.25%) rate hike was sufficient to induce a six quarter recession. This is of course complete nonsense, otherwise economies would be sinking into recession every time a central bank raised interest rates even marginally.

An oil shock is the more plausible explanation:

Prior to the Great Recession, oil consumption in both EU and US peaked in 2005 / 2006. The oil supply was unable to keep up with demand; indeed, the oil supply was barely growing at all, leading to claims of ‘peak oil’, including by this author.

With the onset of the Great Recession, oil consumption plummeted in both the US and EU, and both fell into deep recessions. Oil consumption in the US and Europe fell largely in tandem in the EU to 93% and in the US, to 90% of 2005 levels during 2009. The decline in consumption resulted directly from high oil prices in 2008.

After 2009, oil consumption both in the EU and US began to recover, only to run straight into resurgent oil prices. US oil consumption again began to decline, but bottomed in 2012 and began to recover, notwithstanding high oil prices. By contrast, EU oil consumption was declining throughout this period, bottoming in 2014, that is, just about the time the European recession ended.

Europe has never regained its former consumption levels, falling to 83% of 2005 levels in 2021. US oil consumption in 2021 was down only 5% compared to 2005.

What was the difference between Europe and the US during the post-2005 period? Simple. Oil. The US was saved by the shale revolution, and therefore was able to adjust by import substitution whereas Europe had to adjust to high oil prices purely through demand destruction. As we treat oil as an ‘enabling commodity’, lower oil consumption generally implies lower levels of economic activity, and so it proved in Europe.