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IV. OIL PRICE DEVELOPMENTS: DRIVERS ECONOMIC CONSEQUENCES AND ...

Source: www.oecd.org
Topic: Economic Policy

Sort Desciption: Economic policy should. respond cautiously to oil. price shocks. x. A high tax component of the final price reduces oil intensity and ...

Content Inside: OECD Economic Outlook No. 76 1 IV. OIL PRICE DEVELOPMENTS: DRIVERS ECONOMIC CONSEQUENCES AND POLICY RESPONSES Introduction The price of oil has risen significantly At the end of October the oil price had more than doubled in dollar terms since the late 1990s while increasing substantially though somewhat less in terms of the other major currencies (Figure IV.1). The chapter begins by investigating the fundamentals driving longer-term oil market developments and the implications for the long-run equilibrium price. It then identifies short-term influences which may have caused risk premia to rise volatility to increase and the oil price to diverge from its equilibrium. It concludes with an assessment of the impact of higher oil prices on OECD growth and inflation and the implications for economic policy. The main points to emerge from the analysis are as follows: Global dependence on oil will continue x Notwithstanding more efficient use of oil in production oil is likely to retain its importance as a fuel in the longer term increasingly for transport. In addition to expected strong demand in North America strong oil demand growth from rapidly growing and energy-intensive non-OECD countries would entail an upward structural shift in the demand for oil per increment of global GDP. with growing reliance on OPEC x While global oil reserves are probably relatively ample their distribution is likely to be increasingly concentrated on the Middle Eastern members of OPEC which already account for around two- thirds of global proved reserves. Outside the Middle East newly- discovered resources have tended to become smaller and more expensive to develop being increasingly offshore. and a likely trend rise in the oil price x The OECD baseline scenario used here generates a trend rise in the real oil price from $27 per barrel in 2003 to $35 a barrel by 2030 both prices expressed in year 2000 dollars if initial OPEC/non- OPEC market shares are maintained over the pro ...

oil prices consequences, oil price developments

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