Key points
- Oil price shocks can trigger inflation and recessions.
- OPEC supply decisions drive price swings.
- Energy weight in CPI affects inflation readings.
Example
A $20/barrel energy shock can raise headline CPI by ~0.3–0.5%, creating temporary but powerful supply-side inflation.
In history
WTI crude surged from ~$80 in early 2022 to $120 in June amid Ukraine supply disruptions, then fell to $70 by late 2023.
Related terms