Global Oil Price Shocks Effects on the US Economy: The Role of Cross-State Heterogeneity in Shale Oil Production Levels

This paper examines how global oil price shocks affect the US economy, focusing on heterogeneity driven by state-level shale oil production. Using an LP-IV model on state-level data (2005-2023) and an oil supply news shock, we assess impacts on economic conditions and unemployment. Our very preliminary results suggest a positive oil supply news shock negatively impacts aggregate US economic conditions and employment. While conventional oil production levels show little difference in state responses, we observe some heterogeneity based on shale production, where these negative effects appear more muted. This research highlights the importance of regional factors in assessing oil market dynamics, though further validation is essential.