In the euro area, inflation rates in the aftermath of the oil price shocks edged up markedly in the 1970s and 1980s and went into double-digit figures. Euro area inflation rates since 1999 have been much more contained. In light of such evidence: Is the expression ‘oil price shock’ old hat?
Or, as David Walton of the Bank of England put it some weeks ago: “Has oil lost its capacity to shock?” 2 There are several plausible explanations for the muted impact of oil price increases in recent times.