{
  "title": "Lower Oil Reliance Insulates World From 1970s-Style Crude Shock",
  "publication": "IMF Blog, May 5, 2022",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2022/05/05/lower-oil-reliance-insulates-world-from-1970s-style-crude-shock",
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  "summary": "The war in Ukraine and sanctions on Russia are causing substantial economic spillovers, notably for energy. Oil prices have climbed, but increases have largely been contained thanks to spare production capacity in some countries and strategic petroleum reserves in others.",
  "sections": [
    {
      "heading": "Context and headline findings",
      "content": "- Publication date: May 5, 2022\n- Topic: Economic spillovers from the war in Ukraine and sanctions on Russia, with a focus on energy and oil-price effects.\n- Key observation: Oil prices have climbed but increases have largely been contained thanks to spare production capacity in some countries and strategic petroleum reserves in others."
    },
    {
      "heading": "Oil-price movements and comparisons to the 1970s",
      "content": "- Brent crude rose to a seven-year high around $100 before the invasion sent it surging to more than $130.\n- Historical comparison: Crude prices almost tripled between August 1973 and January 1974.\n- Measurement of oil reliance: Economists track oil intensity by comparing how many barrels are needed to produce $1 million in gross domestic product.\n- Relative change in oil intensity: The oil intensity measure was about 3.5 times higher than current levels when crude prices spiked in 1973–1974."
    },
    {
      "heading": "Why a 1970s-style stagflation is less likely now",
      "content": "- Lower oil reliance:\n  - The world relies less on oil today than in the 1970s, reducing the potential macroeconomic shock from oil-price spikes.\n- Labor market structures:\n  - There is generally a lower prevalence of wage-setting mechanisms that automatically adjust worker pay based on inflation, reducing upward wage-price spirals.\n- Monetary policy framework:\n  - More central banks are independent today, and the credibility of monetary policy has broadly strengthened since the 1970s."
    },
    {
      "heading": "Growth and inflation outlook",
      "content": "- IMF expectation: Global growth is expected to be close to the pre-pandemic average of 3.5 percent, even after the April World Economic Outlook lowered projections.\n- Risks: Growth could slow more than forecast, and inflation could turn out higher than expected.\n- Regional vulnerability: These risks may be most salient for parts of Europe, given their relatively higher reliance on Russian energy imports.\n\nSource: IMF blog post “Lower Oil Reliance Insulates World From 1970s-Style Crude Shock,” May 5, 2022.\n\n---\n\n\n References\n\n- war in Ukraine\n- Chart of the Week\n- https://www.imf.org/wp-content/uploads/2022/05/oil-intensity-chart-cotw.jpg\n- April World Economic Outlook\n\nSource: https://www.imf.org/en/blogs/articles/2022/05/05/lower-oil-reliance-insulates-world-from-1970s-style-crude-shock"
    }
  ],
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    "Authors: Nico Valckx",
    "Published: May 5, 2022",
    "Publication date: May 5, 2022",
    "Topic: Economic spillovers from the war in Ukraine and sanctions on Russia, with a focus on energy and oil-price effects.",
    "Key observation: Oil prices have climbed but increases have largely been contained thanks to spare production capacity in some countries and strategic petroleum reserves in others.",
    "Brent crude rose to a seven-year high around $100 before the invasion sent it surging to more than $130.",
    "Historical comparison: Crude prices almost tripled between August 1973 and January 1974.",
    "Measurement of oil reliance: Economists track oil intensity by comparing how many barrels are needed to produce $1 million in gross domestic product.",
    "Relative change in oil intensity: The oil intensity measure was about 3.5 times higher than current levels when crude prices spiked in 1973–1974.",
    "Lower oil reliance:",
    "Labor market structures:",
    "Monetary policy framework:",
    "IMF expectation: Global growth is expected to be close to the pre-pandemic average of 3.5 percent, even after the April World Economic Outlook lowered projections.",
    "Risks: Growth could slow more than forecast, and inflation could turn out higher than expected.",
    "Regional vulnerability: These risks may be most salient for parts of Europe, given their relatively higher reliance on Russian energy imports.",
    "[war in Ukraine](https://www.imf.org/en/Topics/IMF-and-Ukraine)",
    "[Chart of the Week](https://www.imf.org/en/News/Chart-of-the-week)",
    "[https://www.imf.org/wp-content/uploads/2022/05/oil-intensity-chart-cotw.jpg](https://www.imf.org/wp-content/uploads/2022/05/oil-intensity-chart-cotw.jpg)",
    "[April World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2022/04/19/world-economic-outlook-april-2022)"
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