The Impact of Sustained High Oil Prices on Trade Flows

The study analyses the impact of high oil prices on the European economy and examines policy options to support adjustment. Following macroeconomic and sectoral effects, as well as the impact on the EU's overall trade balance, the study looks at economic responses to high oil prices with an emphasis on trade policy instruments. While the main policy responses aim at improving fuel efficiency, fuel substitution and recycling, trade policy has an important complementary role in supporting the overall objective of reducing the energy intensity of European industry through environmental standards, low or zero tariff on environmental goods and by enhancing the EU's adjustment potential. The study concludes that overall, the need and scope for trade policy responses to high oil prices is limited. Still, policies that facilitate the adjustment of European companies, encourage consumers to save energy while help secure long-term energy supplies, are worthy of consideration.