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Abstract If oil price changes reflect demand shocks, then an oil price decline, say, would suggest a slowdown in global economic activity. Alternatively, if the oil prices are driven by supply shocks, then the drop in prices might indicate a forthcoming boost in spending as firms and households benefit from lower energy costs. In this paper, I use correlations of weekly oil price changes with a broad array of financial variables to decompose oil price changes in components due to global demand and those due to global oil supply. Quarterly aggregates of these two weekly oil price shocks are then used as proxy variables to identify the impact of latent oil market shocks in a quarterly macro-economic VAR model of the U.S. economy. This analysis shows that supply-driven oil market shocks can potentially impact U.S. economic activity in a more significant manner than demand-driven oil market shocks.