Effects of the Latest Oil Price Rise

The Gulf crisis has caused new turbulence in the world oil market. Price developments in the near future will essentially depend on whether a military conflict can be avoided or not. Given this uncertainty two scenarios were elaborated: a main version with spot market prices remaining at about the current level of 25 $ per barrel until end 1991 and a conflict version with spot prices rising to 39 $ a barrel for the next six months. In the main scenario still seeming the more likely one for the time being the negative effects on the Austrian economy remain limited. The rise in import prices is damped by the weakness of the dollar, the 1991 average rate of domestic inflation is boosted by a little less than ½ percentage point. Growth of real GDP is reduced by ½ percentage point and the balance on current account deteriorates by about AS 7 billion. The increase in domestic petrol prices since the end of July has been broadly in line with spot market quotations in Rotterdam; however, in the months before there would have been some scope for price cuts given the decline in import prices since last autumn.