1. The impact of oil price increase
on the global economy
Hyunjoon Chang
Korea Energy Economics Institute

2. The third oil shock?
Korea Energy Economics Institute

3. Previous oil shocks’ features
Common features
1. When the world economy was expanding at a rapid rate
2. When the world’s crude oil capacity was being stretched to the limit
3. When investment in oil and gas exploration had tapered off, making it impossible to achieve a speedy increase in non-OPEC output
Korea Energy Economics Institute

4. Economic Boom
USA
Korea Energy Economics Institute

5. Commercial stock in OECD
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6. Investment expenditure
Korea Energy Economics Institute

7. Different impact Impact on Industrial countries
<Table> Permanent $5 barrel increase in the price of oil
Source: IMF
Korea Energy Economics Institute

8. Different impact Impact on Emerging markets
<Table> Estimated effects after 1 year a $5 oil price hike
Source: IMF
Korea Energy Economics Institute

9. Why different? Energy Intensity Korea Energy Economics Institute
Source: OECD, Economic Outlook, no 68, Dec 2000
Korea Energy Economics Institute

10. Why different? “New” Economy High economic growth Low growth
in energy use
New Economy
IT industries contributed 1/3
of real U.S. economic growth
(1995~1999)
Energy consumption
per dollar of GDP
fell by 4%
(1997~1998)
Korea Energy Economics Institute

11. Why different? Competition Rotemburg and Woodford(1996) Price
Normal times
cost
margin
Under perfect
Competition
Less higher Price
Oil price
hike
cost
margin
Under imperfect
Competition
Higher Price
cost
margin
Korea Energy Economics Institute

12. Why different? Oil to natural gas Korea Energy Economics Institute
Source: The World Bank(2000)
Korea Energy Economics Institute

13. Concluding remarks
Developing countries’ limitation in impact mitigation
Policy measures against oil price volatility
Strategic oil stock
Improve energy efficiency
Developing countries’ constraint
Difficulties in financial access
Technological limitation
Need to cooperate with developed countries
Korea Energy Economics Institute

14. Concluding remarks Oil to gas regional integration in energy network
Korea Energy Economics Institute

15. Thank you Hyunjoon Chang hjchang@keei.re.kr
Korea Energy Economics Institute