Gideon Bornstein, Per Krusell, Sérgio Rebelo, 01 March 2021

Oil markets have long been central to discussions of the global economy, and fluctuations in oil prices frequently gain widespread attention. This column explores the impact of the rising use of fracking on how oil markets are best conceived within modern macroeconomic theory. The author's model predicts that as fracking accounts for an increasingly sizeable fraction of the world oil supply, it may herald a new era of lower, more stable oil prices.

Rabah Arezki, Simeon Djankov, Ha Nguyen, Ivan Yotzov, 30 October 2020

Voter behaviour is often said to be determined by self-interest and ideology, but empirical support for the role of ideology is mixed. There is, however, evidence that exogenous shocks can negatively affect incumbents’ electoral fortunes. This column explores the effect of oil shocks on electoral outcomes, using a new polling and election data set for 207 elections across 50 democracies. Oil price increases one year before an election systematically lower the odds of incumbents being re-elected. The winning parties are more likely to belong to the opposite end of the political spectrum from the incumbent.

Sascha Bützer, Maurizio Michael Habib, Livio Stracca, 07 March 2015

The large dip in oil prices reverberated across asset markets, contributing to the depreciation of the Russian rouble. This column argues that the recent fall of the rouble may be more an exception than the norm. Oil shocks have only a limited impact on global exchange rate configurations, since oil exporters tend to lean against exchange rate pressures by running down or accumulating foreign exchange reserves.

Olivier Blanchard, Marianna Riggi, 07 December 2009

In the 1970s, large increases in the price of oil were associated with sharp decreases in output and large increases in inflation. In the 2000s, even larger increases in the price of oil were associated with much milder movements. This column attributes the difference in the US to more flexible labour markets and more credible monetary policy during the Great Moderation.

James Hamilton, 16 June 2009

Past oil price spikes associated with Middle East conflicts and OPEC embargos were each followed by a global economic recession. This column argues that the onset of the current economic downturn of is also partly attributable to a sharp increase in the price of oil. Moreover, the interaction of high oil prices and housing problems contributed to the severity of the downturn.

Alan Blinder, Jeremy Rudd, 13 January 2009

Why didn’t the most recent run-up in oil prices have dramatic effects as in the 1970s? Here one of the world’s leading macroeconomists surveys a variety of explanations: i) developed countries are now less energy-intensive, ii) wages are more flexible, iii) the US auto industry is relatively smaller, iv) monetary policy now targets core inflation, and recent shocks were to industrial demand, not oil supply.

Francesco Lippi, 11 June 2008

High oil prices are back – more than $125 per barrel. Such prices are associated with the macroeconomic pains of the 1970s, but this column argues that the recent surge may actually be good news for developed economies’ industries. The logic lies in the difference between demand shocks and supply shocks.

Paul Edelstein, Lutz Kilian, 06 June 2007

Detailed date energy prices and consumer spending in the US from 1970 to 2006 show exactly how oil price changes affect the economy. The declining size of the US auto sector helped to contain the effects of recent oil shocks on the wider economy.


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