Why do Oil Shocks no Longer Shock?

Oil prices and economic cycles have been firmly linked in the public imagination since
the oil shocks of the 1970s, and the global recessions that followed. Spurred by these
events, economists in the 1980s analysed the relationship in a number of econometric
studies, demonstrating a negative correlation in the US and other industrial countries
between oil prices and macroeconomic performance. Yet while the association is
unambiguous at least in the US up to the early 1980s, at some point thereafter the
relationship appeared to attenuate, and in the last few years we have witnessed a steady
rise in the price of oil to historically high levels with no observable negative impact on
macroeconomic indicators. In this paper I review the literature on the impact of oil price
shocks and use the resulting analysis to explain the minimal impact of high oil prices
today.

By: Paul Segal

Latest Tweets from @OxfordEnergy

  • A review of a new OIES paper on oil market conditions and Saudi Arabia’ balancing act: The extent of dislocations i… https://t.co/n8EFPraNEj

    May 24th

  • Jonathan Stern on the latest Groningen earthquake: I think it is likely to accelerate even further the phase-out of… https://t.co/d1tGcAIAjp

    May 23rd

  • About 43% of the industrial gas demand in Europe could, in theory, decline in the 2020s as a result of decarbonizat… https://t.co/0iMqP4dCsd

    May 23rd

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.