Tags: Shiller | oil | price | economy

Shiller: It's 'Hard to Say Exactly How' Oil Price Drop Will Affect Economy

By    |   Wednesday, 14 January 2015 11:54 AM

Oil prices have plunged 57 percent since late June, and it is difficult to determine exactly how they will affect the economy, says Nobel laureate economist Robert Shiller of Yale University.

"Historically, business cycles have been associated with oil prices," he tells CNBC.

"The 1973-74 recession was an oil price spike. And 1979-80, another oil price spike. These are the big recessions of our time" outside of the most recent one.

Oil price movement also affects consumer confidence, Shiller notes. "It really affects psychology," he explains.

"It's hard to say exactly how it will affect psychology in this case, when we are suddenly losing a huge profit from the new technology [fracking]. This country is proud of our oil technology. And it's been boosting our spirit — animal spirits. It's hard to predict where they will go."

The oil price drop could have a mixed impact on the housing market, depending on location, Shiller argues. "The real estate market is not a monolith."

Some experts expect oil prices to slide further. Goldman Sachs and Societe Generale analysts lowered their price forecasts Monday.

Goldman predicted U.S. crude will fall to $41 within three months, and SocGen reduced its average price for this year to $51 a barrel from $65 previously.

"In a violent move like this it's impossible to pick the magic number that's the bottom," Katherine Spector, a commodities strategist at CIBC World Markets, told Bloomberg.

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Oil prices have plunged 57 percent since late June, and it is difficult to determine exactly how they will affect the economy, says Nobel laureate economist Robert Shiller of Yale University.
Shiller, oil, price, economy
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2015-54-14
Wednesday, 14 January 2015 11:54 AM
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