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Energy markets and the macroeconomy


  • V. Baugnet

    (National Bank of Belgium, Research Department)

  • D. Dury

    (National Bank of Belgium, Research Department)


The article looks at the energy markets from a macroeconomic perspective. It first describes the main trends in the production and consumption of energy. Belgium is characterised by a high degree of energy dependency, since it no longer has any fossil fuel resources and renewable energy is not yet well developed in the country. Moreover, its economy has a high energy intensity, due to specialisation in energy-intensive sectors and high consumption of energy products by Belgian households. The operation of the energy markets and the implications for the pricing of energy products is examined in a second part. The pass-through of fluctuations in the price of crude oil onto consumer prices of petrol, diesel and heating oil is both fast and full, in Belgium as well as in the neighbouring countries. However, because of the low level of excise duty on diesel and particularly on heating oil, consumer prices charged for these energy products in Belgium are more sensitive to fluctuations in the crude oil price. Also, the Belgian consumer price of gas and electricity reacts much faster than in neighbouring countries to fluctuations in prices on the international markets, since in other euro area countries, prices are adjusted less frequently than in Belgium and in some cases they are still subject to some form of regulation. More generally, despite liberalisation, the effective degree of competition on the gas and electricity markets is still very low, both in Belgium and in the other euro area countries. Finally, the impact of fluctuations in crude oil prices on inflation and economic activity is discussed. In addition to its high energy intensity and strong reactions of its energy consumer prices to oil price fluctuations, the Belgian economy’s sensitivity to oil shocks is heightened by the indexation mechanism it applies, even though the use of the health index partly neutralises the initial shock. However, that additional negative impact can be curbed by constant monitoring of Belgian competitiveness, as prescribed by a 1996 law on the promotion of employment and the safeguarding of competitiveness.

Suggested Citation

  • V. Baugnet & D. Dury, 2010. "Energy markets and the macroeconomy," Economic Review, National Bank of Belgium, issue ii, pages 61-82, September.
  • Handle: RePEc:nbb:ecrart:y:2010:m:september:i:ii:p:61-82

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    References listed on IDEAS

    1. Meyler, Aidan, 2009. "The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices," Energy Economics, Elsevier, vol. 31(6), pages 867-881, November.
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    More about this item


    energy markets; oil; inflation; pass-through; Belgium;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy


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