Oil Prices and Consumption across Countries and U.S. States

De Michelis, Andrea; Ferreira, Thiago Revil T.; Iacoviello, Matteo

doi:10.17016/IFDP.2019.1263

Working Paper

Oil Prices and Consumption across Countries and U.S. States

Abstract: We study the effects of oil prices on consumption across countries and U.S. states, by exploiting the time-series and cross-sectional variation in oil dependency of these economies. We build two large datasets: one with 55 countries over the years 1975-2018, and another with all U.S. states over the period 1989-2018. We then show that oil price declines generate positive effects on consumption in oil-importing economies, while depressing consumption in oil-exporting economies. We also document that oil price increases do more harm than the good afforded by oil price decreases both in the world and U.S. aggregates.

Keywords: Oil prices; Consumption; Cross-country; U.S. states; Oil dependency;

JEL Classification: E32; F40; Q43;

https://doi.org/10.17016/IFDP.2019.1263