effect of oil price

Introduction

The effect of oil prices on various economic factors has been a subject of extensive research. This synthesis aims to consolidate findings from multiple studies to provide a comprehensive understanding of how oil price fluctuations impact personal consumption expenditures, trade, stock markets, inflation, and overall economic growth.

Key Insights

Personal Consumption Expenditures:
- Rising oil prices have a greater negative impact on personal consumption expenditures compared to falling oil prices. This effect is nonlinear and asymmetric, with consumers initially postponing spending during periods of uncertainty.
- Higher oil prices lead to a decrease in the proportion of aggregate wealth consumed, with the effect being more pronounced before the 1980s.
Trade and Welfare:
- High oil prices increase the distance elasticity of trade, making trade less global and reducing welfare in non-oil-exporting countries.
Stock Market Performance:
- Oil price hikes negatively impact stock market returns in oil-importing countries but positively affect oil-exporting countries. The volatility of oil prices also has asymmetric effects, with oil price drops increasing volatility more than hikes .
- The negative impact of oil price shocks on equity returns is observed across most sectors except mining, and oil and gas industries.
Inflation:
- Oil prices significantly influence inflation dynamics, with the pass-through effect into inflation increasing in the early 2000s up until the global financial crisis. This effect is observed in multiple industrial countries.
- In African OPEC member countries, both positive and negative oil price changes positively influence inflation, with a more significant impact when oil prices drop.
Macroeconomic Growth:
- Oil price shocks, whether temporary, persistent, or permanent, have significant macroeconomic effects, with monetary policy playing a crucial role in influencing outcomes.
- Both direct and indirect effects of high oil prices negatively impact GDP growth, even in net oil-exporting countries.

Conclusion

The research collectively indicates that oil price fluctuations have multifaceted and significant impacts on personal consumption, trade, stock markets, inflation, and overall economic growth. Rising oil prices generally lead to reduced personal consumption and trade, negatively affect stock markets in oil-importing countries, and contribute to higher inflation. These effects underscore the importance of monitoring oil prices and implementing appropriate monetary policies to mitigate adverse economic impacts.

Effect of oil price

Summary

Introduction

Key Insights

Conclusion

Sources and full results

Oil price effects on personal consumption expenditures

Rising oil prices have greater effects on personal consumption expenditures than falling oil prices, with varying effects across countries due to economic development and monetary policies.

The Trade Consequences of Pricey Oil

High oil prices make trade less global, increasing distance elasticity and reducing welfare in non-oil-exporting countries by 0.03 percent.

To consume or not: How oil prices affect the comovement of consumption and aggregate wealth

Higher oil prices lead to a decrease in consumption of aggregate wealth, while lower oil prices increase consumption, with a stronger effect before the 1980s.

Does oil move equity prices? A global view

Oil price rises negatively impact equity returns for all sectors except mining and oil and gas industries, suggesting international portfolio investors should consider hedging oil price risk.

Oil price asymmetric effects: Answering the puzzle in international stock markets

Oil price hikes negatively impact stock markets in oil-importing countries, while oil price volatility positively impacts oil-exporting countries, with drops increasing volatility more than hikes.

Is Oil Price Still Driving Inflation?

Oil prices significantly influence inflation in eight industrial countries, with the United States experiencing nearly doubled oil price impacts on inflation over the last 15 years.

Asymmetric Impacts of Oil Price on Inflation: An Empirical Study of African OPEC Member Countries

Oil price changes have both positive and negative impacts on inflation in African OPEC member countries, with more significant effects when oil prices drop.

The Macroeconomic Effects of Higher Oil Prices

Higher oil prices can lead to higher core inflation, and monetary policy plays a key role in influencing macroeconomic outcomes.

Effects of oil price shocks on the stock market performance: Do nature of shocks and economies matter?

Oil price fluctuations influence stock market performance differently in different economies and periods, depending on the economy's oil characteristics and the nature of the oil price shock.

Estimation of direct and indirect impact of oil price on growth

High oil prices negatively impact GDP growth in 12 economies, even affecting net oil exporters like Indonesia and Malaysia.

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