World Energy Outlook 2006

Table 11.6: Macroeconomic Effects in EIA/IEA High Oil Price Case, 2007-2010
(average percentage point deviation from baseline)
Real GDP Consumer price index
Industrialised countries –0.5 –
United States –0.6 0.5
Germany –0.5 0.6
France –0.5 0.7
Italy –0.3 0.6
United Kingdom –0.4 0.4
Japan –0.2 0.7
Korea –1.0 0.9
Non-industrialised countries –0.9 –
China –0.6 0.9
India –0.3 1.5
Brazil –0.5 0.6
World –0.9 –
Source: EIA/IEA analysis.
The studies described above were carried out at different times and were based
on different energy-price and other assumptions. Therefore, the results are not
strictly comparable. Deriving a rule of thumb from these studies, we estimate
that a sustained $10 per barrel increase in international crude oil prices would
cut average real GDP by around 0.3% in the OECD and by about 0.5% in
non-OECD countries as a whole compared with the baseline. Overall world
GDP would thus be reduced by about 0.4%. Oil-exporting countries would
receive a boost to their GDP, offsetting part of the losses in importing
countries. Oil-importing developing Asian countries would incur bigger GDP
losses, averaging about 0.6%. Most of these effects would be felt within one to
two years, with GDP returning broadly to its baseline growth rate thereafter.
Critically, these estimates assume that all other economic factors remain
unchanged. In practice, changes in other factors may outweigh the impact of
higher oil prices, limiting or increasing GDP losses. The estimates are slightly
lower than those of IEA (2004), in line with the results of more recent
quantitative analyses carried out by the IEA and other organisations.
Using these estimates, we have calculated how fast GDP would have increased
had oil prices not risen since 2002. All other factors are assumed to remain
unchanged and no constraints on productive capacity are considered, which
may not be realistic (see below). This analysis suggests that the world economy
might have grown on average by 0.3 percentage points per year more than it
Chapter 11 - The Impact of Higher Energy Prices 305
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© OECD/IEA, 2007