Hamilton’s Net Oil Price (WTI) Variable

Assuming April value persists into May and June.

Figure 1: WTI Net Oil Price, using previous 3 years (blue). NBER defined peak-to-trough recession dates shaded gray. Source: EIA via FRED, and author’s calculations.

The three year version is due to Hamilton (J.Econometrics, 2003). See Jim’s recent review of oil prices and macroeconomy in the New Palgrave of Economics here.

The association between recession and NOP is unclear, or not as clear as the pre-2010 period. On the other hand, the correlation between NOP and PCE deflator inflation is more obvious.

One thought on “Hamilton’s Net Oil Price (WTI) Variable”

  1. Macroduck

    As is widely reported, the U.S. has largely depleted its stockpile of several types of weapons:

    https://www.nytimes.com/2026/04/23/us/politics/iran-war-cost-military.html

    A new U.S. intelligence assessment finds that Iran has plenty of weapons left:

    https://www.adn.com/nation-world/2026/05/07/us-intelligence-says-iran-can-outlast-trumps-hormuz-blockade-for-months/

    That math means something had to change in the course of the war in order for the U.S. to win in any conventional sense. One possibility is that Iran was coming to the end of its rope and would  have capitulated before the U.S. ran out of weapons. The other possibility is that the U.S. and Israel could resort to war crimes more damaging than those already committed. Both the war-criminal-in-chief and the Secretary of Tough Talk have suggested exactly that.

    The second link says U.S. intelligence has concluded that Iran is not near a breaking point; more of the same until we run out of weapons was unlikely to succeed nor is it obvious than any escalation of war crime would succeed.

    So the U.S. is near accepting a peace plan on Iran’s terms, leaving Iranians worse off, the world worse off, with the U.S. less capable militarily, and with Iran’s government more strongly in control domestically and in the Gulf region.

    Was this outcome forseeable? Yes, it was. This is more or less exactly what was demonstrated in war games run two decades ago:

    https://en.wikipedia.org/wiki/Millennium_Challenge_2002

    Turns out, there was a perfectly obvious reason earlier presidents hadn’t tried to bomb Iran into submission.

Comments are closed.