Oil price shocks might weigh on US economic output but not as badly as in the 1970s, Federal Reserve Chairman Jerome Powell said on Monday amid concerns that the United States' GDP might suffer from crude prices spiraling due to Western sanctions put on major energy exporter Russia
WASHINGTON (Pakistan Point News / Sputnik - 21st March, 2022) Oil price shocks might weigh on US economic output but not as badly as in the 1970s, Federal Reserve Chairman Jerome Powell said on Monday amid concerns that the United States' GDP might suffer from crude prices spiraling due to Western sanctions put on major energy exporter Russia.
While the US experience with the Arab oil embargo of the 1970s was not a happy story, "fortunately, the United States is now much better situated to weather oil price shocks," Powell told the annual conference of the National Association for business Economics.
Oil prices have incrased almost 50% this year, with global crude benchmark Brent hitting 14-year highs of nearly $140 on March 7, as the United States ordered a ban on Russian oil imports on top of the sanctions by the West. In Monday's trading, Brent hovered at just under $115 a barrel.
Powell said as one of the world's largest producers of oil, the US economy was significantly less oil-intensive than in the 1970s.
US GDP was up 5.7% last year, growing the most since 1984. Inflation, measured by the Consumer Price Index, expanded by 7% in 2021 - the highest level since 1981, partly due to higher energy prices.
"Today, a rise in oil prices has mixed effects on the economy, lowering real household incomes and thus demand, but raising investment in drilling over time and benefiting oil-producing areas more generally," Powell said. "On net, oil shocks tend to weigh on output in the US economy, but by far less than in the 1970s."
The United States produced a world record high of 13.1 million barrels per day of oil in early March 2020, just before the onset of the coronavirus pandemic. Production has since dwindled to around 11.6 million barrels daily, according to the US Energy Information Administration.
From: Barani Krishnan - [email protected]
Subject:� Oil Shocks May Weigh on US Economic Output, But by Far Less Than 1970s - Fed Chair Powell
