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Did U.S. Consumers Respond to the 2014-2015 Oil Price Shock? Evidence from the Consumer Expenditure Survey

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  • Patrick Alexander
  • Louis Poirier

Abstract

The impact of oil price shocks on the U.S. economy is a topic of considerable debate. In this paper, we examine the response of U.S. consumers to the 2014-2015 negative oil price shock using representative survey data from the Consumer Expenditure Survey. We propose a difference-in-difference identification strategy based on two factors, vehicle ownership and gasoline reliance, which generate variation in exposure to oil price shocks across consumers. Our findings suggest that exposed consumers significantly increased their spending relative to non-ex-posed consumers when oil prices fell, and that the average marginal propensity to consume (MPC) out of gasoline savings was above 1. Across products, we find that consumers increased spending especially on transportation goods and non-essential items.

Suggested Citation

  • Patrick Alexander & Louis Poirier, 2020. "Did U.S. Consumers Respond to the 2014-2015 Oil Price Shock? Evidence from the Consumer Expenditure Survey," The Energy Journal, , vol. 41(1), pages 175-198, January.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:1:p:175-198
    DOI: 10.5547/01956574.41.1.pale
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    References listed on IDEAS

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    2. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
    3. Edelstein, Paul & Kilian, Lutz, 2009. "How sensitive are consumer expenditures to retail energy prices?," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 766-779, September.
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