Beyond the oil-driven economy
What is the impact of climbing oil prices on the European economy and employment? The EU-funded project ' HOP! - Macro-economic impact of high oil price in Europe' (HOP!) sought to answer this question. It also aimed to provide alternative solutions to the energy sector and its dependence on fluctuating oil prices. The project partners used a combined modelling approach exploiting recent sophisticated models to understand the interaction between transport, economy and environment. The exercise yielded different scenarios regarding cost of oil, alternative energy and transport technologies until 2050. Issues such as government support, demand and supply, competitiveness and investment in new technologies were all factored into the projections. Other factors that were considered included infrastructure supply, transport demand, macroeconomic system, fuel prices, climate change and development of alternative energy sources. The researchers concluded that higher energy and transport costs will negatively impact economic growth, while investment in alternative energy will positively impact it. The health of the economy will ultimately depend on which of these two realities will be stronger. In addition, the project foresees continued economic growth for the EU, which would be higher for new Member States (+ 2.7 %) and lower for older States (+ 1.2 %), i.e. the EU-15. Increasing oil prices are expected to encourage investment in energy efficiency and alternative sources, while an increase in freight mobility and transport needs will also increase. The study extrapolated different figures for the years to come reflecting an increased price of oil, an annual loss of GDP and a projected loss of employment. All this will be due to the large variety of dampening effects on both the oil price and its economic impact. HOP! recommended investing in alternative energy sources and energy efficiency to mitigate the effects of high oil prices. It concluded that while oil scarcity and price fluctuations could have large negative impacts on Europe, the EU could preempt this by encouraging investment. With oil production set to increase in the mid-term, it is vital to start preparing from now.
