Abstract:
The distinction between the price of gasoline in the U.S. and the price of crude oil in global markets is often ignored in discussions of the impact of higher energy prices. This article makes explicit the relationship between demand and supply shocks in these two markets. Building on a recently proposed structural VAR model of the global crude oil market, it explores the implications of a joint VAR model of the global market for crude oil and the U.S. market for motor gasoline. It is shown that it is essential to understand the origins of a given gasoline price shock, when assessing the responses of the price of gasoline and of gasoline consumption, since each demand and supply shock is associated with responses of different magnitude, pattern and persistence. The article assesses the overall importance of these shocks in explaining the variation in U.S. gasoline prices and consumption growth, as well as their relative contribution to the evolution of U.S. gasoline prices since 2002.

Abstract:
This paper studies the effect of oil price shocks on U.S. state-level unemployment rates. First, using a test of symmetry, I evaluate whether the relationship between oil prices and state unemployment rates is symmetric. I find no evidence against the null of symmetry after accounting for data mining. Second, I use a symmetric structural VAR model to analyze the effect of oil supply shocks, aggregate demand shocks and oil-specific demand shocks on state unemployment. I find that an adverse supply shock triggers increases in unemployment, whereas a positive aggregate demand shock reduces the unemployment rate across most U.S. states. I also show that oil-specific demand shocks have little effect on state unemployment. Finally, I dig into the historical contribution of the various oil shocks to the changes in state unemployment rates during the shale boom period. I find that aggregate demand shocks contributed the most to the change of unemployment.