Oil's role in the economic cycle has changed — growth and recession now have other drivers

Whether elevated oil prices risk triggering stagflation was examined last week through the lens of their relationship with CPI and GDP. Over the past decade, the correlation has been broadly positive — suggesting the risk is limited. The explanation is straightforward. American oil consumption is split roughly equally between transportation and industry. In recent years, manufacturing has been subdued, with PMI readings frequently dipping below the 50-point expansion threshold. Add to that the maturation of shale extraction, nuclear power and renewables, and the outcome is unsurprising.

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KC Law (Economist)

Law Ka Chung is a Hong Kong economist and financial columnist.