gws

Rising fuel prices and trade. A macro-economic impact analysis for big

traders with a focus on Germany

by

Gesellschaft für Wirtschaftliche Strukturforschung mbHHeinrichstr. 30 ° D – 49080 Osnabrück, GermanyTel.: + 49 (541) 40933-12 ° Fax: + 49 (541) 40933-11Email: lutz @ gws-os.de ° Internet: www.gws-os.de

First Meeting of the Working Party on International Trade in Goods and Trade in Services Statistics (WPTGS), Paris,

22-24 September 2008

Dr. Christian LutzInstitute of Economic Structures Research (GWS)

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1. Introduction: Oil price and GDP Shock analysis

Vector autoregressive models: GDP of oil-importing countries is negatively hit by oil price

shocks; Darby (1982), Hamilton (1983) Effect is asymmetric; Mork (1989) nonlinear estimations: better results

Lee et al. (1995), Hamilton (1996), Jimenez-Rodriguez / Sanchez (2005)

Structural econometric models GDP of oil importing countries is negatively hit by oil price

shocks (IEA 2004, EIA 2006) differences between countries can be explained by structural

differences of their economies. positive effects of rising GDP of oil exporting countries are not

easy to analyze. Accumulation of surplus stocks. (EIA 2006), (Jimenez-Rodriguez/Sanchez 2005)

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Introduction: Oil price and GDP

6 transmission channels for oil importers (Lardic and Mignos 2008) Reduction of potential output, negative terms of trade effects, increased money demand, inflation including second round effects, negative demand side impacts, structural changes

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Contribution of the paper: Effects of a permanent rise (surplus stocks neglected)

of the energy prices on a net energy importing country (Germany) including the international trade effects

Three channels for trade effects: change of goods imports of energy exporters induce

goods exports of energy importers depending on the regional and the goods structure of

the exports of the importer change of trade shares

depending on the price impact for goods in all countries change of goods imports of energy importers

consumption to investment

Introduction: Oil price and GDP

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2. GINFORS: Data Sources and Coverage

Data sources

data sources global coverage

UN COMTRADE 2 regions (OPEC, ROW)OECD IO (41 sectors)

OECD STAN, SNA DT

National sources (CN, TW)

macro OECD/IMF 52 countriesenergy/CO2 IEA 52 countries

material SERI 52 countries

population UN 52 countries

model type

input-output and sector

22 countries (more than 80% of world GDP)

tradeOECD (BTD, 25 sectors, Services)

50 countries (> 95% of world GDP, trade, energy consumption)

cou

ntr

y m

od

els

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Country Coverage

GINFORS: Data Sources and Coverage

country models OPEC ex. Indonesia ROW

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Bilateral Trade for 25

Goods & Services

LUM

MIM

MM

EEM

IOM

LUM MIM MM EEM IOM

LUM

MIM

MM

EEM

IOM

LUMMIMMMEEMIOM

3. GINFORS: Model Structure

Wheel of GINFORS: General architecture

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GINFORS: Model Structure

Bilateral Trade for 25

Goods & Services

LUM

MIM

MM

EEM

IOMIOM

EEM

MIM

MM

LUM

Input-Output-Model

Energy-Emission-Model

Macro-Model

Material-Input-Model

Land-Use-Model

Country Model

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GINFORS: Model Structure

General architectureB

ilate

ral m

ulti

sect

or

tra

de

mo

de

l (2

5 se

cto

rs +

se

rvic

es)

input-output models - final demand - intermediate demand - primary inputs

macro models - balance of payment - SNA totals - budget of the government & private sector - labour market

energy-emission models - final consumption - transformation - primary energy supply - emissions

material models

Bila

teral m

ultise

ctor tra

de m

od

el

(25 se

ctors +

services)

exportdemand

importprices

importdemand

exportprices

land-use models

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GINFORS: Model Structure

Trade model: Export of good i in country k explained by:

Share of country k in the imports of good i in all other countries

Imports of good i in all other countries Import price of good i explained by:

Weighted average of the export for good i of all countries Weights: Trade shares

Shares are automatically estimated for price dependency time trends 1994 - 2004

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4. Scenarios

Oil price 200 $/bbl (HEP) against 100 $/bbl in 2010 (baseline) Coal and gas prices proportionally

0

50

100

150

200

250

1991 1995 2000 2005 2010 2015 2020

High energy price scenario Baseline

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Impacts on real GDP in 2010: HEP against baseline

5. The results

-3,7%

-2,4%

0,0%

-4,3%

-12,2%

8,3%

23,0%

-15% -10% -5% 0% 5% 10% 15% 20% 25%

USA

Germany

UK

Japan

China

Russia

OPEC

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Macroeconomic impacts in Germany – HEP against baseline in %

The results

2010 2015 2020

GDP Deflator 3,81 4,96 5,10

Consumption Prices (CPI) 6,43 7,34 7,13

Export Prices 9,86 11,81 11,20

Import Prices 22,96 23,19 19,25

Real GDP -2,43 -0,39 0,37

Components:

Exports 1,48 2,13 2,45

Imports -2,38 -0,78 0,90

Final consumption expenditure by households -4,31 -2,76 -2,08

Gross fixed capital formation -1,65 -0,32 0,30

Final consumption expenditure by government -5,68 -3,73 -2,84

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Impacts on industries in Germany – HEP against baseline in %

The results

(1) Agriculture 12,6 -3,3 12,6 15,5(2) Mining and Quarrying 74,3 -8,5 66,3 74,3(3) Food 7,3 -2,4 7,3 15,2(4) Textiles 10,7 -6,4 10,7 13,6(5) Wood 8,1 -0,5 8,1 11,4(6) Pulp, Paper 9,3 -2,1 9,3 15,5(7) Coke, Refined Petroleum Products 44,4 -5,5 44,4 68,9(8) Chemicals excl. Pharma 14,7 -0,4 14,7 27,2(9) Pharmaceuticals 4,5 4,1 4,5 12,6(10) Rubber and Plastics 11,4 1,8 11,4 19,4(11) Non-Metallic Minerals 15,7 -0,9 15,7 28,5(12) Iron & Steel 16,0 0,4 16,0 22,9(13) Non-Ferrous Metals 4,5 -2,4 4,5 10,5(14) Metal Products 9,7 0,8 9,7 19,8(15) Machinery and Equipment 8,5 1,4 8,5 16,1(16) Office Machinery 8,7 2,3 8,7 19,8(17) Electrical Machinery 8,1 2,6 8,1 19,0(18) Radio, TV 9,0 0,4 9,0 18,0(19) Medical, Precision and Optical Instruments 7,2 5,2 7,2 14,2(20) Motor Vehicles 9,7 4,8 9,7 15,2(21) Ships 9,5 -2,5 9,5 15,1(22) Aircraft 4,5 -2,4 4,5 13,3(23) Railroad 4,5 -2,4 4,5 17,4(24) Manufacturing Nec; Recycling 8,9 2,0 8,9 19,2(25) Electricity, Gas, Water Supply 24,3 0,5 24,3 15,8

Total 9,4 -1,9 9,9 23,0

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6. Conclusions

Energy importing countries may profit from higher energy prices via international trade

The case of Germany: Improved terms of trade Shift from consumption to investment Additional exports of investment goods GDP reduction only in the short run negatively Consumers pay the bill

Further research is necessary for other countries Impacts in a world of carbon or supply (peak oil)

constraints?