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Germany in the grips of a new oil crisis?

Author

Listed:
  • Wolfgang Nierhaus
  • Wolfgang Meister

Abstract

For a year and a half the price of crude oil has risen continuously reaching $35 a barrel by mid-September, the highest level since the Kuwait crisis ten years ago. As a result of the oil price explosion and the strength of the dollar, total imports have become 10.3% more expense and industrial products 4.2%, in annualised rates. Consumer prices in September rose at an annualised rate of 2.7%. In a year-on-year comparison, in which the price effects of the second stage of the ecological tax reform is also reflected, the rate of inflation was 2.4%. Assuming that the average price for crude oil in the second half of the year 2000 is at around $30 a barrel and that the exchange rate for the euro is at ca. $0.88, total German oil imports for the year will be about DM 30 billion more expensive than last year, at the same quantities. After deducting for exports of crude oil and mineral oil products, net expenditures should add up to about DM 55 billion, which is DM 25 billion more than the previous year. With this, 1.3% of total economic output will go for crude oil and mineral oil products, which is 0.6 percentage points more than last year. Thus, the impact of the increase in the price of oil on Germany this year will still not match the dimensions of the 1974 and 1979/80 oil crises, measured in terms of the share of oil costs in nominal GDP. However, increasing oil costs will be at the expense of real income because of lowered per-unit profits and higher domestic prices. The recent results of the Ifo Business Survey show that demand weakening for domestic consumer goods and services may occur.

Suggested Citation

  • Wolfgang Nierhaus & Wolfgang Meister, 2000. "Germany in the grips of a new oil crisis?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 53(26), pages 23-28, November.
  • Handle: RePEc:ces:ifosdt:v:53:y:2000:i:26:p:23-28
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    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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