Research Briefing | Dec 9, 2022

US oil prices are still a threat as the economy is vulnerable

Swings in oil prices pack less of an economic punch than in the past but sudden increases can still be costly, particularly now when the economy is vulnerable. Using our macro model, we estimate that every $10 increase in oil prices would reduce GDP growth over the next year by 0.1ppts to 0.2ppts.

What you will learn:

  • Because of the weakening global economy, appreciation in the US dollar, geopolitical tensions, and potential for OPEC+ to cut output again, any forecast for oil prices is subject to a significant amount of uncertainty.
  • Consequently, we have estimated four scenarios for oil prices: $70, $90, $120, and $130 and their impact on the US economy. Based on our calculations, a sustained price for oil of $130 per barrel would be the breaking point and would be sufficient to push the US economy into recession.
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