Oil on the water: How shipping cost pressures shape the inflationary effects of oil shocks

This paper investigates the impact of shipping cost pressures on the transmission of oil supply shocks to inflation. Using local projections on a panel of oil-importing and exporting countries, we show that headline, energy, and producer price inflation respond more strongly and persistently to oil supply shocks when shipping cost pressures are high. While the responses of importers and exporters typically differ, high shipping cost pressures are associated with stronger inflationary effects of oil shocks in both sets of countries. These findings extend to the case of oil demand shocks.