Latfi Karoui, a PIMCO credit market analyst focused on macroeconomics, energy and global credit, explores why this year’s oil shock is breaking historical patterns. They discuss diverging market reactions, lessons from 2022, America’s lower oil intensity, AI investment, recovering oil flows and the risks posed by refining bottlenecks, consumer spending and renewed geopolitical disruption.
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insights INSIGHT
Why Credit Markets Absorbed The Oil Shock
Oil prices followed past geopolitical shocks, but investment-grade spreads stayed flat while Treasury yields rose.
Higher yields may support credit demand by increasing all-in returns despite tight spreads.
insights INSIGHT
Why This Oil Shock Breaks The Historical Playbook
Energy shocks usually evolve from inflation scares into growth scares, pushing investors toward safety and lower yields.
The current episode differs because it began without pandemic-era zero rates, massive asset purchases, or supply-constrained fiscal stimulus.
insights INSIGHT
Services Made America Less Oil Intensive
The U.S. economy now uses far less oil per unit of output, reducing energy shocks’ direct growth impact.
In 1991, producing comparable GDP required roughly twice today’s oil consumption because manufacturing was more dominant.
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In this episode, we discuss how This year’s energy price shock isn’t exactly following the historical playbook, with markets and economies absorbing much of the impact – though clear risks remain.
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