Limited hit from energy price rise on US consumption so far

The impact of energy on the US economy has declined over the last three decades, but a series of shocks since the pandemic and a +30% price surge since July has brought the topic back to light. We find that it would take a material rise in energy prices and a combination of negative factors for households before there is a visible toll on overall spending. We’re not there yet and anticipate only a marginal impact on consumption at this stage

The significance of energy trends for the US economy has declined over the last three decades. The consumption of energy for each real dollar of GDP has fallen by 3% every year and this will continue with the energy transition. The share of services in the economy has also crept up at the expense of secondary activities. In particular, the energy impact on consumption has declined from 6% to 4% over the last two decades, and from 3% to 2% on production. After the great energy shocks of the 70s, authorities have gained experience in managing oil shocks, further mitigating their impact. Last, but not least, oil self-sufficiency via rising shale gas production over the last 10 years has been a game changer. 

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