By Howard Schneider
WASHINGTON, June 23 (Reuters) – Oil surging to more than $120 a barrel last spring cut about three-tenths of a percentage point from U.S. economic output, but the blow was a small fraction of what would have taken place from a similar oil shock in the 1980s when the country was more reliant on imports, a new Dallas Fed study estimated.
The roughly 15% cut to global oil supplies after the U.S.-backed war with Iran led to the closure of the Strait of Hormuz shipping lanes upended world commodity markets as prices rose, supplies became scarce in parts of the world and overall demand dropped.
Dallas Fed researchers estimated that economic activity outside the U.S. fell 1.7% as a result of the war.
But as a net oil exporter, changes in price have a double-edged effect in the U.S., hitting consumers as prices for gasoline rise, for example, but also benefitting oil industry firms and their stockholders. Better efficiency also means U.S. economic output is less dependent on energy than in the past.
Dallas Fed economists Lutz Kilian, Michael Plante and Alexander W. Richter developed a model estimating how the different impacts net out, and found the economy much more immune to oil price shifts than it was in the 1970s and 1980s during prior Middle East supply disruptions.
Those earlier disruptions were smaller but came at a time when the U.S. was spending around 8% of its gross domestic product on oil versus around 3% today.
A change in supply in the 1980s similar to what was just experienced would have cut GDP by an estimated 5.6%, with the rest of the world seeing a comparable 6% decline in output, the research found.
The findings buttress recent economic data showing that the war did little apparent damage to the U.S. economic outlook, with job growth accelerating in recent months and consumption relatively unscathed. Federal Reserve officials are concerned about the impact on prices, but also feel that the impact on inflation could be short-lived.
The U.S. economy grew at about a 1.6% annual rate over the first three months of the year.
(Reporting by Howard Schneider; Editing by Mark Porter)
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