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The Impact of High Oil Prices on the Economy

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  • Barrell, Ray
  • Delannoy, Aurélie
  • Holland, Dawn

Abstract

The rise in global oil prices observed since September 2010 results in part from the social and political instability in the Middle East and North African regions, and in part from longer-term trends reasserting themselves. The unrest sweeping Tunisia earlier this year spread over many surrounding nations, including some major oil producers, such as Algeria and, most significantly, Libya. The Middle East currently supplies about a third of world oil and possesses over half of the world's proven reserves. Clearly, instability in the region automatically raises worries of supply disruptions and possible oil shortage, stimulating speculation and driving world oil prices to new peaks. Speculators have a tendency to overshoot the impact of a supply shock, and in any case supply-driven spikes should remain temporary, fading away as political stability returns.

Suggested Citation

  • Barrell, Ray & Delannoy, Aurélie & Holland, Dawn, 2011. "The Impact of High Oil Prices on the Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 217, pages 68-74, July.
    • Handle: RePEc:cup:nierev:v:217:y:2011:i::p:f68-f74_10
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    Cited by:

    1. Lorusso, Marco & Pieroni, Luca, 2018. "Causes and consequences of oil price shocks on the UK economy," Economic Modelling, Elsevier, vol. 72(C), pages 223-236.
    2. FitzGerald, John & Znuderl, Nusa & Duffy, David & CASE (Poland) & CPB (Netherlands) & DIW Berlin (Germany) & ETLA (Finland) & The Kiel Institute for the World Economy (Germany) & NIESR (United Kingdom, 2012. "Economic Assessment of the Euro Area: Winter 2011/2012 Report," Research Series, Economic and Social Research Institute (ESRI), number sustat29.
    3. Guhathakurta, Kousik & Dash, Saumya Ranjan & Maitra, Debasish, 2020. "Period specific volatility spillover based connectedness between oil and other commodity prices and their portfolio implications," Energy Economics, Elsevier, vol. 85(C).

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