Oil supply shocks – Rabobank

By FXStreet FXStreet (Guatemala) – Analysts at Rabobank explained that while global economic growth affects the demand for oil, pushing up oil prices if the world economy accelerates and reducing oil prices in case of a slowdown, the impact on the US economy is relatively modest.

Key Quotes:

“Historically, negative shocks in the supply of oil have had a more significant impact and are able to push the US economy into recession, as we saw in 1973-1975. To a certain extent, the impact of oil supply shocks may be less of a problem now than in the past, as the domestic shale oil industry has made the US less dependent on oil imports.”

“It has become easier to expand supply in the short run, due to the shale oil fields that have already been developed and the improvement in technologies to find new oil fields and extract oil. What’s more, since the oil crises of the 1970s the US has made efforts for consumption and production to become less oil-dependent.

However, as a result of these efforts transportation is left as the main factor in US oil dependence, which has made total US demand for oil less elastic. On balance, while a major shock …read more

Source:: FX Street