World Energy Outlook 2006

average by 7.7% in 2004 and 7.4% in 2005 – well above the rates of the early
2000s and 1990s. China’s GDP surged by about 10% in both 2004 and 2005,
while India notched up growth of over 8% (Figure 11.20). The resilience of the
developing countries’ economies to surging oil prices is all the more remarkable
given that most of them are large net importers of oil and have relatively oilintensive
economies. Growth in the Middle East accelerated in 2005 to 5.7%,
thanks to higher oil-export revenues.
12%
10%
8%
6%
4%
2%
0%
–2%
Source: IMF (2006b).
Figure 11.20: Real GDP Growth by Region
1998 1999 2000 2001 2002 2003 2004 2005
US Euro area Japan
World
China India
Africa
So, given the magnitude of recent oil-price increases, why has the adverse
macroeconomic impact been so obscure? There are several reasons why
economic growth has remained high and current account balances have been
less affected than might have been expected, chief among which is the
remarkable underlying strength of the world economy. This is reflected in high
rates of growth in production and income, coupled with low inflation. In fact,
rising oil prices are at least partly the result of strong economic growth in many
parts of the world, especially Asia. This growth has certainly tempered the
adverse impact of higher energy prices on importing countries. Some countries
would have grown even more rapidly had oil prices not risen, though
constraints on productive capacity might have capped economic growth.
For example, GDP growth in the oil-importing developing Asian countries,
which averaged 9.2% in 2005, may not necessarily have been as much as
Chapter 11 - The Impact of Higher Energy Prices 307
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© OECD/IEA, 2007