According to the latest research from the Federal Reserve Bank of Boston, the substantial increase in U.S. domestic oil production since the 1970s has significantly reduced the impact of energy price shocks on American inflation and unemployment.

The Boston Fed researchers stated in a report published on Thursday that an oil price shock similar to the one currently triggered by conflict in the Middle East would push the U.S. Personal Consumption Expenditures (PCE) price index up by 1.5 percentage points over the following year. In contrast, during the 1970s, the impact of such a shock was approximately 2.2 percentage points.

Simultaneously, a shock of similar magnitude in the 1970s would have reduced employment growth by 1.8 percentage points. However, researchers noted that this negative effect "has largely disappeared in recent years."

For the study's authors, including the bank's chief economist, this implies that "monetary policy should pay more attention to the inflationary impact of oil price shocks than to their employment effects."

This is partly because "the diminished impact on employment likely means there is also less disinflationary pressure available to offset the inflationary effects of higher oil prices."

The study points out that rising energy costs now have a smaller effect on the job market because states with highly concentrated oil production, such as New Mexico, North Dakota, Alaska, Oklahoma, and Texas, may experience employment gains from the energy sector even as other regions lose jobs.

The Boston Fed researchers found that under a scenario akin to the current oil price shock, Texas's relative employment growth rate could increase by about 1.7 percentage points, while Massachusetts's relative employment level could decline by roughly 0.4 percentage points.

The United States is now the world's largest oil producer. Data from early 2026 indicates its daily production remains high at around 13.6 million barrels.

Concurrently, U.S. oil producers are planning to increase output to capitalize on the energy crisis spurred by Middle Eastern conflict and the potential for oil prices to remain elevated for a longer period.

Several companies, including the third-largest U.S. oil producer Diamondback Energy (FANG.US) and shale driller Continental Resources, have stated they are expanding drilling activities as oil prices rise toward approximately $100 per barrel.

Harold Hamm, founder of Continental Resources, noted that due to higher prices, the company plans to increase its capital expenditure by about $300 million in 2026, raising the total to $2.8 billion.

Energy consultancy Enverus reported that publicly traded shale producers, in their first-quarter earnings reports, raised their capital expenditure expectations for the year by $490 million compared to guidance from three months prior.

Since late February, U.S. oil firms have added 18 drilling rigs, bringing the total to 425. Most of this increase occurred in the past month when the Brent crude futures price for 2027 rose to around $75 per barrel.

Alex Ljubojevic, head of supply analysis at Enverus, stated, "This price level is more attractive to operators and sufficient to drive increased activity. This is why companies are beginning to deploy more capital and drilling."

However, experts caution that even a moderate expansion in U.S. drilling cannot compensate for a potential global supply shortfall of 12 million barrels per day that could result from a closure of the Strait of Hormuz.

Furthermore, major publicly listed oil companies remain cautious about significantly expanding production, fearing that oil prices could fall as rapidly as they rose should a peace agreement be reached between the U.S. and Iran.

In recent years, these companies have emphasized "capital discipline," with investors preferring that additional profits from high oil prices be used for debt repayment and shareholder returns rather than for expanding production.