Oil, the Economy, and Monetary Policy
Soaring oil prices have caused speculation about the prospects for a national recession this winter. These concerns seem to be well grounded; all but one of the eight post-World War II recessions in the United States were preceded by an oil price shock. However, there is also evidence that the influence of oil prices on economic performance has diminished. This article examines the impact of an oil shortage on the U.S. economy from a theoretical perspective, reviews the effects that such shocks have had in the past, and discusses the problems that these crises present for monetary policy.
The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit clevelandfed.org for updates.