Search Results
Working Paper
Oil Prices and Consumption across Countries and U.S. States
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 ...
Discussion Paper
Why Did the Recent Oil Price Declines Affect Bond Prices of Non-Energy Companies?
Oil prices plunged 65 percent between July 2014 and December of the following year. During this period, the yield spread?the yield of a corporate bond minus the yield of a Treasury bond of the same maturity?of energy companies shot up, indicating increased credit risk. Surprisingly, the yield spread of non?energy firms also rose even though many non?energy firms might be expected to benefit from lower energy?related costs. In this blog post, we examine this counterintuitive result. We find evidence of a liquidity spillover, whereby the bonds of more liquid non?energy firms had to be sold to ...
Journal Article
Higher Oil Prices May Not Meaningfully Boost Oklahoma’s Broader Economy
The Iran conflict has significantly curtailed global oil supply, causing a sharp increase in prices. This edition of Oklahoma Economist examines how elevated oil prices may affect the state’s economy. It finds that higher prices have boosted oil and gas firms’ profits, but several factors may limit broader economic gains for Oklahoma.
Journal Article
Higher Oil Prices Will Likely Increase Severance Tax Revenues in Rocky Mountain States
The Iran conflict that began in February triggered a historically large energy market disruption, leading to a substantial increase in oil prices. Although higher oil prices may present challenges for households and businesses, Rocky Mountain states’ budgets—especially Wyoming and New Mexico—stand to gain from additional severance tax revenue related to elevated oil prices.
Discussion Paper
A New Approach for Identifying Demand and Supply Shocks in the Oil Market
An oil-price spike is often used as the textbook example of a supply shock. However, rapidly rising oil prices can also reflect a demand shock. Recognizing the difference is important for central bankers. A supply-driven increase in the price of oil can result in higher unemployment and inflation, leaving central bankers with the difficult decision to loosen policy, tighten policy, or not respond at all. A demand-driven increase reflecting global growth may support the case for tighter policy. In this post, we describe an approach for decomposing oil price changes into supply and demand ...
Journal Article
The Response of U.S. Investment to Oil Price Shocks: Does the Shale Boom Matter?
After an unprecedented decline from 2014 to 2016, the real price of oil more than doubled, renewing interest in the effects of oil price fluctuations on the U.S. economy. The oil sector has become increasingly important to the U.S. economy over the past decade, and total U.S. business fixed investment appears to have followed oil investment?s pattern in recent years. This positive correlation between oil prices and U.S. investment growth may be related to the surge in U.S. oil production known as the shale boom. {{p}} Nida ak?r Melek explores the effect of unexpected oil price changes (or ...
Discussion Paper
Lower Oil Prices and U.S. Economic Activity
After a period of stability, oil prices started to decline in mid-2015, and this downward trend continued into early 2016. As we noted in an earlier post, it is important to assess whether these price declines reflect demand shocks or supply shocks, since the two types of shocks have different implications for the U.S. economic outlook. In this post, we again use correlations of weekly oil price changes with a broad array of financial variables to quantify the drivers of oil price movements, finding that the decline since mid-2015 is due to a mix of weaker demand and increased supply. Given ...
Discussion Paper
Putting the Current Oil Price Collapse into Historical Perspective
Since the outbreak of the COVID-19 pandemic in late January, oil prices have fallen sharply. In this post, we compare recent price declines with those seen in previous oil price collapses, focusing on the drivers of such episodes. In order to do that, we break oil price shocks down into demand and supply components, applying the methodology behind the New York Fed’s weekly Oil Price Dynamics Report.
Working Paper
Macroeconomic Implications of Oil Price Fluctuations : A Regime-Switching Framework for the Euro Area
We investigate whether the response of the macro-economy to oil price shocks undergoes episodic changes. Employing a regime-switching vector autoregressive model we identify two regimes that are characterized by qualitatively different patterns in economic activity and inflation following oil price shocks in the euro area. In the 'normal regime', oil price shocks trigger only limited and short-lived adjustments in these variables. In the 'adverse regime', by contrast, oil price shocks are followed by sizeable and sustained macroeconomic fluctuations, with inflation and economic activity ...
Journal Article
Do Adverse Oil Price Shocks Change Loan Contract Terms for Energy Firms?
This article examined whether the relationship between creditworthiness and loan spreads for energy firms in the syndicated loan market changed after the 2014 oil-price shock. {{p}} The authors use syndicated loans, which are jointly funded by several financial institutions, because the syndicated loan market is a major source of debt financing for oil firms. Credit conditions tightened following the oil-price shock in mid-2014.