Macroeconomic Impacts of Oil Shocks  

Date and Time
February 8, 2005

Availability
Open to the public
No RSVP required

The purpose of the February 8 meeting was to encourage a discussion among experts from the government, companies and universities about our existing understanding and recent analysis of the economic effects of oil price shocks. Economists both inside and outside of Washington DC are often asked to comment and provide analysis on this issue.

In an effort to begin but not constrain the discussion, the Energy Modeling Forum suggested that the group consider four important issues:

1. What types of shocks could be a problem?
   
2. What are the GDP impacts of such shocks?
   
3. What causes the economic dislocation?
   
4. What issues remain uncertain?

Economists within the US Department of Energy usually consider three separate effects on national income:

1. The permanent (as long as shock persists) effects on full-employment productivity;
   
2. The temporary effects caused by higher unemployment and economic dislocations;
   
3. The reduction in purchasing power of national income caused by a higher price for a key imported raw material input.

When the group discusses the inflationary effects of oil price shocks, it would be useful to differentiate between:

1. Higher aggregate price levels (reinforced by additional wage hikes)
   
2. Higher inflation rates where price increases persist into the future

The meeting is organized around several summary presentations, followed by group discussion of each topic. There is obvious overlap between the topics, which have been organized chronologically in terms of when the topics became important areas of inquiry.