UBS economist Arend Kapteyn wrote on Wednesday that the global economy is materially less vulnerable to an oil price shock today than it was during the crises of the 1970s. In a note circulated to investors, Kapteyn compared oil spending relative to GDP across decades and concluded that the share of GDP devoted to oil has "more than halved" since 1974 despite higher nominal prices.
Kapteyn highlighted a remark from the head of the International Energy Agency that, in the current Middle East conflict, more oil has been lost than in both of the 1970s oil shocks combined. Yet UBS cautioned that translating supply losses into economic outcomes is not straightforward, in part because oil intensity - the amount of oil consumed per unit of economic output - has fallen sharply over time.
To illustrate the point, Kapteyn contrasted U.S. consumption and spending in 1974 with those in 2024. In 1974, U.S. oil consumption totaled 803 million tonnes, accounting for roughly 4.8% of GDP. By 2024, consumption is barely higher, at about 813 million tonnes, while nominal GDP has expanded nearly twentyfold.
Using today’s average oil price of $81 per barrel, Kapteyn calculated that U.S. spending on oil is about 1.7% of GDP. Even under a scenario where oil reaches $100 per barrel, he estimated spending would increase to around 2% of U.S. GDP - a level that remains well below the 1974 share.
Europe displays a similar evolution. UBS estimated the European Union’s oil spending has declined from about 3.7% of GDP in 1974 to roughly 1.8% in 2024. UBS attributed this shift to a combination of slower GDP growth in Europe since the 1970s and larger gains in energy efficiency over the intervening decades.
Kapteyn used these comparisons to underscore a central point: the oil intensity of the global economy has decreased substantially, and that decline has reduced the macroeconomic strain associated with recent supply shocks and price increases. At the same time, UBS noted that assessing the economic impact of contemporary disruptions remains complex because of the changed relationship between oil consumption and economic output.
Key takeaways
- Oil spending as a share of GDP in major economies is significantly lower now than in 1974, reducing sensitivity to price shocks.
- U.S. oil consumption in 2024 (about 813 million tonnes) is only marginally above 1974 levels (803 million tonnes), while nominal GDP is roughly twenty times larger.
- EU oil spending fell from about 3.7% of GDP in 1974 to roughly 1.8% in 2024, aided by energy efficiency gains.
Contextual note
These calculations form the basis of UBS’s conclusion that a rise to $100 per barrel would raise U.S. oil spending to roughly 2% of GDP, still below the 1974 share, while the decline in oil intensity has generally lowered macroeconomic vulnerability to oil price shocks.