The Impact of Higher Oil Prices on Low Income Countries and on the Poor

This paper was commissioned by ESMAP as part of an investigation on energy security issues from the perspective of developing countries, starting with a literature review and a concept note prepared by Ms. Dominique Lallement with research assistance from Ms. Anupa Vege.

 Mr. Robert Bacon is the author of this report, with inputs from Mr. Shane Streifel and Mr. Andrew Burns of the World Bank's Economic Research Department. The report was peer-reviewed by Mr. Shimon Awerbuch of Sussex University, UK, Ms. Dominique Lallement, Mr. Ananda Covindassamy, and Mr. Hans Timmer of the World Bank, and discussed at an ESMAP- Knowledge Exchange Event in the World Bank. The feedback received from peer reviewers and colleagues was most helpful in defining the agenda for further work. Special thanks to Ms. Esther Petrilli-Massey for the report formatting, and to Ms. Marjorie K. Araya for coordinating the publication.

Three levels of analysis are used to discuss these issues: the macroeconomic, that looks at the direct impact of the balance of payments and the necessary adjustment of GDP to restore equilibrium; the mesoeconomic, that looks at factors which determine a country’s propensity to be a net oil importers, including oil self-sufficiency, oil dependence and energy intensity; and the microeconomic that looks at the direct impact and indirect impacts on households of an increase in oil prices.