To model the elasticity of energy commodities to crude oil, first think about the retail gasoline pipeline.

Therefore, a rise in oil prices today redirects more income between domestic consumers and producers than it did previously, cushioning some of the negative impact of an oil shock.

Blanchard and Gali (2007) find that fluctuations in inflation and growth diminished over time owing to the FOMC stronger commitment to price stability in the Volcker era.

All these factors suggest the increases in oil prices will only have a mild effect on growth and inflation.

Moreover, structural changes to the economy should limit the negative impact.

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