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Notes:
- CPI inflation tracks movements in the world oil price, through impacts on energy prices
and then lagged impacts on other commodity prices.
- From the initial oil price shock of 1973-74, and the subsequent shocks, there are
observable changes in GDP growth as the world oil price has undergone dramatic change.
- Energy’s share of the economy is changing. At its peak in 1981, total energy
expenditures accounted for 14 percent of GDP, while petroleum accounted for 8 percent.
Since then, the share for total energy has fallen to 7 percent as of 1995, and petroleum
has fallen even further to just over 3 percent.
- Current upward movements in the CPI are moderated by the low level of core CPI inflation
(minus energy and food) and worldwide competition in traded goods. However, if oil prices
remain high, this will place continued pressure on prices of other commodities, in the
United States and worldwide.
- If the price of oil rises and remains at $30 per barrel over the next year, this might
add 0.5 percentage points to the CPI inflation rate over a case where oil prices remain in
the low $20 per barrel range. This increase in inflation might lower GDP growth on the
order of 0.5 percentage points.
