Alan Murray, the editor of Fortune and a member of the Hutchins Center Advisory Council, posed a timely question to a panel of prominent economists recently: “We used to think that a falling oil price was a great thing for consumers, and again, this may be a U.S.-focused view, but now we aren’t so sure. Maybe globally it’s a wash, but how much should we be worried about what’s happening with oil prices?”
In response, Joseph Stiglitz, a Nobel laureate, noted that in the short-term the adverse effects on the losers from changes in oil prices are greater than the benefits to the winners.
Ben Bernanke, the former Federal Reserve chairman and now a distinguished fellow at Brookings, added that financial markets are far more globally integrated today than in the 1970s, and markets may be transmitting financial strains caused by falling oil prices.
Whatever the explanation, it remains a surprise that the shale oil boom in the U.S. hasn’t translated into greater economic growth than we’ve seen, and has proved particularly problematic for financial markets.