EMF Publications

EMF OP 43 Crude Oil Prices and U.S. Economic Performance: Where Does the Asymmetry Reside?

Occasional Paper

Hillard G. Huntington - Stanford University

Published by
Stanford University, 1998

Sustained decreases in crude oil prices appear to affect the U.S. economy differently than sustained increases. This paper shows that a significant part of the observed asymmetry is due to the adjustments within the energy sector and not within the rest of the economy. In particular, sustained decrease in petroleum product or general energy prices do not appear to have qualitatively different macroeconomic impacts than do sustained price increases. The singular focus on crude oil price changes in previous studies is misplaced. Moreover the 1986 oil price collapse did not operate in isolation for other important events. As crude oil prices fell in this period, other factors caused a major devaluation of the U.S. dollar that had potentially important effects on the U.S. economy.