Since it first bubbled from the ground in Pennsylvania in 1859, oil has had a grip on the economy. Since it was first formed in 1960, OPEC has had a grip on oil prices. In this analysis, we consider whether oil and OPEC still have the same hold on the economy. ; We examine recent oil price movements from a long-term perspective and assess the consequences for economic activity. We show that current oil prices are moderate by historical standards, and that substantial increases are unlikely. OPEC continues to be a major factor in world oil markets, affecting oil price volatility. U.S. economic activity is still hurt by rising oil prices, but less than it was twenty years ago. Similarly, regional economic activity is less sensitive to oil price changes.
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Article provided by Federal Reserve Bank of Dallas in its journal In Depth.