In the new CAMP working paper 08/2018 Bjørnland and Zhulanova anlyze if the transmission of oil price shocks on the U.S. economy has changed as a result of the shale oil boom.
In contrast to previous results, the authors find considerable changes in the way oil price shocks are transmitted: there are now positive spillovers to non-oil investment, employment, real personal income and production in many U.S. states from an increase in the oil price – effects that were not present before the shale oil boom. This explains why the U.S. did not experience a boom following the steep decline in oil prices between 2014 and 2016. The country has increased its reliance of oil by becoming the world’s largest oil producer. An oil price increase may now actually be good news for economic activity in the U.S.!