Oil Intensities and Oil Prices : Evidence for Latin America
Crude oil prices have dramatically increased over the past years and are now at a historical maximum in nominal terms and very close to it in real terms. It is difficult to argue, at least for net oil importers, that higher oil prices have a positi...
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| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/06/9493553/oil-intensities-oil-prices-evidence-latin-america http://hdl.handle.net/10986/6657 |
| Summary: | Crude oil prices have dramatically
increased over the past years and are now at a historical
maximum in nominal terms and very close to it in real terms.
It is difficult to argue, at least for net oil importers,
that higher oil prices have a positive impact on welfare. In
fact, the negative relationship between oil prices and
economic activity has been well documented in the
literature. Yet, to the extent that higher oil prices lead
to lower oil consumption, it would be possible to argue that
not all the effects of a price increase are negative.
Climate change concerns have been on the rise in recent
years and fossil fuel consumption is generally viewed as one
of the main causes behind it. Thus this paper explores
whether higher oil prices contribute to lowering oil
intensities (that is, oil consumption per unit of gross
domestic product). The findings show that following an
increase in oil prices, OECD countries tend to reduce oil
intensity. However, the same result does not hold for Latin
America (and more generally for middle-income countries)
where oil intensities appear to be unaffected by oil prices.
The paper also explores why this is so. |
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