As the years went on and the United States produced 13% of the world output in oil, the growing use of oil in large markets has likewise emerged thus also making an impact on the U.S. economy. Thankfully for consumers, the oil price has not grown steadily upwards. Fuel conservation, efficiency actions, new oil discoveries overseas, as well as the shale oil wave, have led to strengthening supply and have offset the effect of growing oil usage.
Changes in Oil Price – Channels Affected
The transfer of oil prices to the US economic sectors can be direct and indirect. 30% of costs in the agricultural sector are associated with energy inputs which directly impacts the price of food.
Oil prices also affect the transportation expenses of the commercial and industrial sector and directly affect the prices of other goods and raw materials like metals. It further affects travel by increasing the fuel costs of the aerospace and land transportation sectors.
There is likewise a solid relationship between the price of oil and the price of other areas in the economic sector. Crude oil prices have pushed inflation-adjusted bond yields and key inflation signals. On the other hand, in the years after the 70’s oil crisis, oil-driven inflation has been weakened by more flexible supply and demand circumstances, and it seems to be more affected by the business cycle economy.