§ Dr. CableTo ask the Chancellor of the Exchequer what estimate he has made of the impact on his projected GDP growth in 2003 and 2004 of an average oil price of(a) $30 in 2003 and 2004, (b) $40 in 2003 and $30 in 2004; and (c) $60 in 2003 and $40 in 2004. [85648]
§ John HealeyBy raising production costs and so constraining supply, higher oil prices tend to depress GDP growth, simultaneously pushing up inflation and unemployment. The UK differs from most other major industrialised economies in that it is a small net exporter of oil. Potential GDP losses therefore may be partly offset by increased UK incomes deriving from North Sea production due to the improvement in the terms of trade.
In practice, the overall economic effects from rising oil prices are difficult to estimate as they depend largely on second round impacts on wages and other prices, as well as movements in business and consumer confidence.