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How much does an increase in oil prices affect the global economy ? some insights from a general equilibrium analysis

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  • Timilsina, Govinda R.
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    Abstract

    A global computable general equilibrium model is used to analyze the economic impacts of rising oil prices with endogenously determined availability of biofuels to mitigate those impacts. The negative effects on the global economy are comparable to those found in other studies, but the impacts are unevenly distributed across countries/regions or sectors. The agricultural sectors of high-income countries, which are relatively energy intensive, would suffer more from rising oil prices than would those in lower-income countries, whereas the reverse is true for the impacts across manufacturing sectors. The impacts are especially strong for oil importers with relatively energy-intensive manufacturing and trade, such as India and China. Although the availability of biofuels does mitigate some of the negative impacts of rising oil prices, the benefit is small because the capacity of biofuels to economically substitute for fossil fuels on a large scale remains limited.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6515.

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    Date of creation: 01 Jun 2013
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    Handle: RePEc:wbk:wbrwps:6515

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    Keywords: Energy Production and Transportation; Energy Demand; Oil Refining&Gas Industry; Environment and Energy Efficiency; Energy and Environment;

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    1. Timilsina, Govinda R. & Beghin, John C. & van der Mensbrugghe, Dominique & Mevel, Simon, 2010. "The impacts of biofuel targets on land-use change and food supply : a global CGE assessment," Policy Research Working Paper Series 5513, The World Bank.
    2. AydIn, Levent & Acar, Mustafa, 2011. "Economic impact of oil price shocks on the Turkish economy in the coming decades: A dynamic CGE analysis," Energy Policy, Elsevier, Elsevier, vol. 39(3), pages 1722-1731, March.
    3. Timilsina, Govinda R. & Csordás, Stefan & Mevel, Simon, 2011. "When does a carbon tax on fossil fuels stimulate biofuels?," Ecological Economics, Elsevier, Elsevier, vol. 70(12), pages 2400-2415.
    4. Timilsina, Govinda R. & Mevel, Simon & Shrestha, Ashish, 2011. "Oil price, biofuels and food supply," Energy Policy, Elsevier, Elsevier, vol. 39(12), pages 8098-8105.
    5. Rebeca Jimenez-Rodriguez & Marcelo Sanchez, 2005. "Oil price shocks and real GDP growth: empirical evidence for some OECD countries," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(2), pages 201-228.
    6. Lutz Kilian, 2008. "A Comparison of the Effects of Exogenous Oil Supply Shocks on Output and Inflation in the G7 Countries," Journal of the European Economic Association, MIT Press, MIT Press, vol. 6(1), pages 78-121, 03.
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