Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Fed's Kaplan sees muted economic hit from any oil price rise

Published 06/19/2018, 10:02 AM
Updated 06/19/2018, 10:10 AM
© Reuters. FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan gestures during a news conference after of the True Economic Talks event in Mexico City

(Reuters) - Global oil prices look poised to rise in the medium term, but since the United States produces more oil than it once did and businesses are more judicious in their fuel use, a jump in oil prices would not hurt the country's economic growth much, a U.S. central banker predicted on Tuesday.

"It is the view of Dallas Fed economists that the negative impact of higher oil prices on GDP growth is likely to be more muted than in the past," Dallas Federal Reserve Bank President Robert Kaplan said in an essay on the economic impact of energy markets.

He said that a 10-percent increase in oil prices would likely have only a relatively modest negative impact on U.S. GDP growth, adding the negative impact should decline as the United States continued to boost domestic oil production.

After a few years where a global oversupply of oil sent prices falling, supply and demand are now in a "fragile equilibrium," Kaplan said, citing Dallas Fed research.

He added, however, that demand may outstrip supply in a few years, in part because U.S. oil production - increasingly a key source of the global oil supply - may not be able to keep up with the world economy's growing appetite for fossil fuels. Geopolitical events could give rise to price spikes as well, Kaplan noted.

Historically, oil price rises have often been followed by recessions, but Kaplan sees the American economy as less vulnerable to such shocks these days.

© Reuters. FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan gestures during a news conference after of the True Economic Talks event in Mexico City

Households will still feel a pinch when gasoline prices increase, but higher prices help a growing segment of the economy that produces oil, and businesses have become more efficient in their usage of fuels.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.