Oil inflation drives global CPI rates, impacting US and China disproportionately.
The article explores how oil price inflation affects consumer price inflation in the G7 countries and China from 1987 to 2020. By using a special model and analyzing data, the researchers found that oil price inflation and CPI inflation are closely linked, especially during oil crises and financial stress. The US inflation is most influenced by oil price inflation, which then has a smaller impact on other countries' inflation rates. The US also has the highest spillover effect on other countries' inflation, while China has the lowest. Overall, oil price inflation mainly affects short-term inflation trends rather than long-term ones.