Oil prices, the terms of trade and private consumption

Nikola Bokan, Maarten Dossche and Luca Rossi

Economic Bulletin Boxes, 2018, vol. 6

Abstract: Oil prices affect private consumption through direct and indirect channels. An increase in oil prices affects households' purchasing power directly through higher prices for oil-based energy products (e.g. petrol, heating oil). In the euro area about one-third of the economy's total oil use is in the form of final consumption, i.e. the use by consumers of such products. The other two-thirds comes from oil being used in the production of non-energy goods. A rise in oil prices implies an increase in the production costs of these sectors. If these costs cannot be passed on to the final prices of these goods, there will be an indirect impact on households' purchasing power, since either wages or profits received from these sectors will be lower. Moreover, for advanced economies that produce oil (e.g. Canada, Norway, the United Kingdom and the United States) the indirect effects through wages and profits from the oil-producing sector are even more important. JEL Classification: E01, E21

Keywords: consumption; oil prices; terms of trade (search for similar items in EconPapers)
Date: 2018-09
Note: 2613775
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.ecb.europa.eu//pub/economic-bulletin/f ... box201806_03.en.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbbox:2018:0006:3

Access Statistics for this article

More articles in Economic Bulletin Boxes from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().