Between June 2014 and March 2016, the inflation-adjusted price of oil dropped by 66%. This price decline was one of the largest in history, yet average U.S. economic growth accelerated only slightly from 1.8% at annual rates before the oil price decline to 2.2% after the oil price decline. The absence of an economic boom in response to falling oil prices has puzzled some observers, given that higher oil prices in the past have been blamed for major economic recessions. That said, it is well documented that the consumption stimulus from lower oil prices is only modest, and the recent episode is no exception. What had not been fully appreciated is that the oil investment response does not depend so much on the magnitude of the oil price decline, but rather on how far the expected oil price declines relative to the break-even point. Hence, oil investment may change disproportionately, as oil price expectations change. This fact may hold the key to understanding the macroeconomic consequences of oil price shocks in countries with a sizable oil sector such as the United States. Professor Kilian presented on this article’s topic during his keynote speech at the JPMCC’s August 2017 international commodities symposium.