Dáil Éireann Debate, Tuesday - 6 April 2004
204 Mr. Broughan asked the Minister for Finance if, in view of the recent continued and unexpectedly high oil prices, he will make a statement on the impact of these prices on growth rates here; and his views on estimates of international research bodies and media regarding this matter. [10560/04]
View answerAs of 2 April 2004 the price of oil had risen by 36% since its 21-month low of $22.94 on 28 April 2003. The increased price of oil is due to several factors, including reduced supply and increased demand as a consequence of the recovering international economy. In the event of a sustained, significant increase in the price of oil, disposable spending power would tend to decrease and economic growth would tend to weaken both in Ireland and in our major trading partners. Our exports to the latter would decrease and inflation in Ireland would increase. Therefore, a sustained increase in the price of oil would impact negatively on both economic growth and inflation in Ireland. However, due to the recent appreciation of the euro the full effect of the increased oil price has not significantly impacted on Irish inflation. The strong euro has also mitigated the adverse impact on the European economy.
My Department's economic forecast at budget time last December assumed that the 2004 price of oil would be $25.60 per barrel. The average price of a barrel of oil in the first quarter of this year has been 25% higher than that. However, model estimates conducted by the ESRI in the past indicate that if this price level were sustained for the rest of the year then it would reduce GNP growth by about one eighth of a per cent in the medium term.
