Are Temporary Oil Supply Shocks Real?

Hurricanes disrupt oil production in the Gulf of Mexico because producers shut in oil platforms to safeguard lives and to prevent damage. We examine the effects of these temporary oil supply shocks for real economic activity in the U.S. We find no evidence that temporary oil supply shocks affect state-level employment or indirectly affect industrial production in sectors not immediately related to oil production. Temporary oil supply shocks appear to have minor price effects, mainly for gasoline prices and CPI inflation. We also find no effect on imports, exchange rates or the import price of oil. Our results suggest that oil reserves held by U.S. refiners are largely sufficient to absorb any temporary production disruptions.