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European Union

European Commission Warns of Economic Consequences of Rising Oil Prices

Strategic Insights

— 1 min read

The European Commission has expressed concerns about the impact of rising oil prices on the economy, with Commissioner Joaquin Almunia warning that high prices could lead to both growth and inflation issues. The current price of oil is above the September 2000 average, with a reported "risk premium" of $10 a barrel. The Commission has acknowledged that the supply and demand balance does not explain the current price of crude oil, citing the risk of oil supplies being disrupted due to various global events.

Key Takeaways:

  • The European Commission has expressed concerns about the economic impact of rising oil prices, with Commissioner Joaquin Almunia warning that high prices could lead to both growth and inflation issues.
  • The current price of oil is above the September 2000 average, with a reported "risk premium" of $10 a barrel.
  • The Commission has acknowledged that the supply and demand balance does not explain the current price of crude oil.
  • The risk of oil supplies being disrupted has increased due to various global events, including legal problems surrounding Russian oil group Yukos, hurricanes in the Gulf of Mexico, and civil unrest in Nigeria.
  • The European Commission has made a set of recommendations, including adapting road haulage contracts to diesel price increases and exploring avenues for closer co-operation with oil-producing countries.
  • The Commission also recommends developing a new reference price system and getting demand under control to reduce EU oil consumption per unit of GDP.
  • Commissioner Loyola de Palacio's aides suggest promoting the role of nuclear energy as an alternative to oil.

Statistics:

  • The current price of oil is a Euro 3 higher than the September 2000 average.
  • The reported "risk premium" is $10 a barrel.
  • The Commission recommends adapting road haulage contracts to diesel price increases.
  • The EU oil consumption per unit of GDP could be reduced via various policy measures.
  • The proposed new reference price system is expected to be developed before 2006.

Sources:

  • "European Commission warns of economic consequences of rising oil prices" (exact source not provided).
  • European Commission, "Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions: Adapting Road Haulage Contracts to Diesel Price Increases" (exact source not provided).
  • European Commission, "DG TREN Oil Price Monitoring Service Plan" (exact source not provided).
  • Newspaper article, "Oil prices: A risky gamble" (exact source not provided).

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