LIVE MARKETS-Oil shocks hit US economy less hard, but inflation risk lingers
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OIL SHOCKS HIT US ECONOMY LESS HARD, BUT INFLATION RISK LINGERS
The United States is significantly less vulnerable to oil price swings than it was decades ago, though energy costs still carry meaningful inflation implications, according to LPL Research.
The U.S. economy has become far less "oil intensive," meaning that it requires less oil per dollar of economic output than in past decades, LPL chief economist Jeffrey Roach said in a note.
At the same time, it has transformed into a net petroleum exporter, buffering it from the oil-driven downturns that rattled the economy in the 1970s and 1980s.
Still, elevated energy costs can feed into broader inflation, potentially keeping the Federal Reserve from cutting interest rates. Geopolitical risks, particularly in the Middle East, remain a wildcard for supply chains and price volatility.
The picture is darker for U.S. allies. Japan imports more than 90% of its crude oil needs, with roughly 88% sourced from the Middle East. Among G7 nations, only the U.S. and Canada are net petroleum exporters, leaving Germany, France, Italy, and the U.K. similarly vulnerable to price spikes.
Roach concludes that although the risk of oil-driven inflation in the United States hasn't disappeared, it has become more manageable.
(Karen Brettell)
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