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Our most academic publication offers research and surveys on monetary policy, national and international developments, banking, and more. The content is written for an economically informed readership—from the undergraduate student to the PhD.


Vol. 88, No. 6 (Posted 2006-11-01)

Rising Natural Gas Prices and Real Economic Activity

by Kevin L. Kliesen

In the aftermath of the disruptions caused by hurricanes Katrina and Rita, natural gas prices rose to record-high levels. Because natural gas is an important energy source for the U.S. economy, there was widespread concern that these high prices might cause a significant slowing in the economy—especially among those manufacturing industries that heavily consume natural gas. The analysis presented in this article suggests that output is responsive to natural gas prices in some manufacturing sectors. Although perhaps significant, this result must be balanced against the finding that, when the analysis is extended to the macroeconomy (real gross domestic product growth), increases in crude oil prices significantly predict real gross domestic product growth, but natural gas prices do not.

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