The Macroeconomic Effects of Oil Supply News: Evidence from OPEC Announcements

This paper studies how changes in oil supply expectations affect the oil price and the macroeconomy. Using a novel identification design, exploiting institutional features of OPEC and high-frequency data, I identify an oil supply news shock. These shocks have statistically and economically significant effects. Negative news leads to an immediate increase in oil prices, a gradual fall in oil production, and an increase in inventories. This has consequences for the US economy: activity falls, prices and inflation expectations rise, and the dollar depreciates, providing evidence for a strong channel operating through supply expectations.

Automated summary

This study finds that changes in oil supply expectations can have significant effects on oil prices and the US economy, with negative news leading to price increases, activity declines, and inflation expectations rising.