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Economic Exposure to Oil Price Shocks and the Fragility of Oil-Exporting Countries

Toon Vandyck (), Alban Kitous (), Bert Saveyn, Kimon Keramidas (), Luis Rey Los Santos () and Krzysztof Wojtowicz ()
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Toon Vandyck: European Commission, Joint Research Centre, 41092 Seville, Spain
Alban Kitous: European Commission, Joint Research Centre, 41092 Seville, Spain
Luis Rey Los Santos: European Commission, Joint Research Centre, 41092 Seville, Spain
Krzysztof Wojtowicz: European Commission, Joint Research Centre, 41092 Seville, Spain

Energies, 2018, vol. 11, issue 4, 1-19

Abstract: From a price range between 100 and 120 USD (U.S. dollars) per barrel in 2011–2014, the crude oil price fell from mid-2014 onwards, reaching a level of 26 USD per barrel in January 2016. Here we assess the economic consequences of this strong decrease in the oil price. A retrospective analysis based on data of the past 25 years sheds light on the vulnerability of oil-producing regions to the oil price volatility. Gross domestic product (GDP) and government revenues in many Gulf countries exhibit a strong dependence on oil, while more diversified economies improve resilience to oil price shocks. The lack of a sovereign wealth fund, in combination with limited oil reserves, makes parts of Sub-Saharan Africa particularly vulnerable to sustained periods of low oil prices. Next, we estimate the macroeconomic impacts of a 60% oil price drop for all regions in the world. A numerical simulation yields a global GDP increase of roughly 1% and illustrates how the regional impact on GDP relates to oil export dependence. Finally, we reflect on the broader implications (such as migration flows) of macroeconomic responses to oil prices and look ahead to the challenge of structural change in a world committed to limiting global warming.

Keywords: oil price volatility; macroeconomic performance; resilience; fragile states; resource curse (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2018
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