Editorial: Declining oil prices – winners and losers in the Euro area
- Euren News, N.2015-1
28/02/2015
Denis FERRANDThe impressive decline in oil prices in the last months is a real “game changer” for economic growth in the Euro area in the short term. Alongside the depreciation of the Euro and the new step in the softening of monetary policy, it implies a positive impulse for growth. This impulse is nevertheless highly differentiated both among countries as well as among economic activities.
If oil prices were to stabilize at 44€ per barrel of Brent all along 2015 (that is the level reached in January as compared to 76€ in 2014), the trade balance for the Euro area as a whole would see an increase of its surplus by about 0.9% of GDP, in relation with the reduction in the value of net imports of both crude and refined petroleum products. The first countries to benefit from this “manna” would be The Netherlands, Belgium and Greece, with an improvement of their trade balance by about 1.4% of GDP. On the opposite, the Italian trade balance would see an improvement limited to 0.7% of its GDP.
Households are among the main winners of this decrease in oil prices through a reduction in imported inflation. Enterprises will benefit from this decrease in accordance with, first, the intensity of their use of oil and, second, their ability to retain this cost reduction in their margins. The main “winners” in terms of reduction of their energy costs are the transportation and the manufacturing industry. The first rank losers are the enterprises involved in exports towards oil producing and exporting countries. Last but not least, considering the impact of falling oil prices on public finances, the results are quite mitigated and depend highly on the type of taxation of energy and specifically of oil products.
Everything taken into account, the impact of the oil prices decline on growth will remain positive for Euro area as a whole. Such a positive external factor creates the conditions to enforce structural reforms that still have to be conducted in many countries as regards to the decrease in their potential growth.
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