Dáil Éireann Debate, Wednesday - 12 May 2004
86 Mr. Sherlock asked the Minister for Communications, Marine and Natural Resources his views on the impact on the economy here of high world oil and other energy prices; and if he will make a statement on the matter. [13702/04]
View answerI am not aware of any recent studies about the impact of sustained high oil and energy prices on international markets. Recent analysis carried out by the International Energy Agency, in collaboration with the OECD economics department, shows that higher oil prices since 1999 have contributed to the global economic downturn in 2000-01 and are dampening the current cyclical upturn. A simulation exercise carried out by the International Energy Agency showed that a sustained $10 per barrel increase in oil prices from $25 to $35 would result in GDP dropping by 0.5% and inflation rising by 0.5% in Eurozone countries, which are highly dependent on oil imports in 2004. However, the exercise also showed that these losses would start to diminish in the following three years.
Analysts agree that oil prices are an important determinant of global economic performance. However, while all of the major economic downturns in the US and Europe since the 1970s have been preceded by sudden increases in the price of crude oil, a number of other factors also played a role. The magnitude of the direct effect of a given oil price increase depends on factors including the degree of dependence of economies on imported oil, the ability of end-users to reduce their consumption and the ability to switch away from oil. It also depends on the extent to which gas prices rise in response to oil price increases, the gas intensity of the economy and the impact of higher prices on other forms of energy that compete with or, in the case of electricity, are generated from oil and gas. Increases in gas prices by and large reflect oil price increases. Ireland's high dependence on oil and gas imports makes the country price takers sensitive to the volatility of the markets.
