Reassessing the U.S. Economy’s Vulnerability to Oil Shocks

Leiva-León, Danilo; Olivei, Giovanni P.; Patvakanian, Ara; Zakrajšek, Egon

Report

Reassessing the U.S. Economy’s Vulnerability to Oil Shocks

Abstract: The impact of today’s oil price shocks may differ markedly from those of shocks in the 1970s. As noted in the minutes of the April 28–29, 2026, Federal Open Market Committee meeting, two structural changes to the U.S. economy could cushion the impact: the substantial increase in domestic oil production and the declining share of spending devoted to energy. This brief examines empirical evidence on how these transformations have altered the U.S. economy’s vulnerability to oil shocks.

JEL Classification: E3; E23; E52; Q34; Q43;