Examining the Effect of Crude Oil Shock on the U.S. PPI Through Time Series Analysis

Abstract

Nowadays, people are becoming more curious about how changes in oil prices affect inflation, particularly how they impact macroeconomic indicators like the PPI (Producer Price Index) and CPI (Consumer Price Index), due to the ongoing pandemic and war's impact on oil prices. The present study examines the relationship between oil price changes and the PPI in selected industries. Using data from the trucking, chemical manufacturing, semiconductor, and electronic device industries PPI from 2020, with WTI (West Texas Intermediate) as the reference of U.S. oil price. The Pearson correlation coefficient and linear regression model were employed to analyze the correlations and evaluate the impact of oil price changes. The results demonstrate that the PPI for the trucking industry had the strongest correlation with oil prices over the same period, while the PPI for the chemical manufacturing industry demonstrated the strongest relationship with oil prices a month earlier. The PPI for the semiconductor industry displayed a strong correlation with oil prices six months ago. Overall, the transportation industry appears to be highly sensitive to changes in contemporaneous oil prices, and oil prices one month ago have a significant concussion on the current PPI of the chemical lines, and the effect of oil prices on the electronic device industry is weaker and more delayed.