The change and fluctuation in the price of oil and their effects on unemployment in the United States of America

Abstract

This research studies the effect of the change and fluctuation in price of oil on unemployment rate divided into different sectors. The Oil Price Shock of 1990, Oil Price Shock of 1999, and the Oil Price Shock of 2003 are the three oil price shocks studied. Multiple regression analysis and ordinary least square is performed on time series data. GDP is also studied and is an independent variable. Oil Price fluctuation is defined as the standard deviation of the daily price of oil for the month. The area of study is America. Oil and America is described as having an important and special relationship. America is a top consumer of oil and not only that but America is a leader in importing of oil. However, America is a top producer of oil. This research finds that in some sectors oil price change and/or fluctuation does have an effect on unemployment rate. What matters most to unemployment rate is GDP, not oil price change and/or fluctuation. To control unemployment rate the key will be to encourage and support GDP growth consistent with maintainable economic progress. It was thought that the more energy intensive or capital intensive a sector was the more it would be affected by oil price change and fluctuation but these were found to not be good measures.