Some oil exporting nations love high oil prices and some don’t. Why the conflict?
Because, some oil exporters will see their GDP rise, while others will actually see their GDP fall.
Meanwhile, importers lose across the board.
The World Bank recently estimated the impact of an oil shock, a scenario where oil price rise $25 in 2012 and another $25 in 2013.
Notwithstanding the slower growth that higher oil prices would induce, metal and food prices would also rise by 9.1 and 4.6 per cent respectively above the baseline. The combined impact of this upward adjustment in commodity prices could shave off 0.5 and 0.6 percentage points from global output in 2012 and 2013 respectively, with GDP in developing oil importing countries reduced (relative to baseline) by 0.9 and 1.3 percentage points over the two years.
Commodity exporting countries see a gain in real income as the prices of their exports rise, with the income effect strongest in countries where exports represent a large share of GDP — notably oil exporting countries in the Middle-East and Sub- Saharan Africa, and metal exporters such as South Africa. Countries with significant export links to countries experiencing strong terms of trade adjustments (such as those between oil-importers countries in Europe and Central Asia and Russia) will benefit from increased import demand which attenuates the impact on their GDP.
Photo: World Bank