gws Rising fuel prices and trade. A macro-economic impact analysis for big traders with a focus on Germany by Gesellschaft für Wirtschaftliche Strukturforschung mbH Heinrichstr. 30 ° D – Osnabrück, Germany Tel.: + 49 (541) ° Fax: + 49 (541) gws-os.de ° Internet: First Meeting of the Working Party on International Trade in Goods and Trade in Services Statistics (WPTGS), Paris, September 2008 Dr. Christian Lutz Institute of Economic Structures Research (GWS)

2008 GWS mbH Page 2 gws 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)

2008 GWS mbH Page 3 gws 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

2008 GWS mbH Page 4 gws 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

2008 GWS mbH Page 5 gws 2.GINFORS: Data Sources and Coverage Data sources

2008 GWS mbH Page 6 gws Country Coverage GINFORS: Data Sources and Coverage country modelsOPEC ex. IndonesiaROW

2008 GWS mbH Page 7 gws 3.GINFORS: Model Structure Wheel of GINFORS: General architecture

2008 GWS mbH Page 8 gws GINFORS: Model Structure Country Model

2008 GWS mbH Page 9 gws GINFORS: Model Structure General architecture Bilateral multisector trade model (25 sectors + services) 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 Bilateral multisector trade model (25 sectors + services) export demand import prices import demand export prices land-use models

2008 GWS mbH Page 10 gws 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

2008 GWS mbH Page 11 gws 4. Scenarios Oil price 200 $/bbl (HEP) against 100 $/bbl in 2010 (baseline) Coal and gas prices proportionally

2008 GWS mbH Page 12 gws Impacts on real GDP in 2010: HEP against baseline 5. The results

2008 GWS mbH Page 13 gws Macroeconomic impacts in Germany – HEP against baseline in % The results

2008 GWS mbH Page 14 gws Impacts on industries in Germany – HEP against baseline in % The results

2008 GWS mbH Page 15 gws 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?