Impacts for Australia Real GDP The results show that for Scenario 1, Australia’s GDP is $556 million lower over the 23 weeks under the low elasticities case (case A) and $465 million lower under the high elasticities case (case B). These losses represent per cent and per cent of GDP that would be produced over the 23 week –0.087 –0.073 period respectively. The results for Scenario 2 are not significantly different. The reason is first, the nature of the shock (as characterised in Chapter 4) is affecting crude oil margins rather than refinery margins and second, that the impacts are estimated relative to a reference case where only 4 refineries are operating. As discussed earlier, the scenarios are compared to different reference cases, which removes the economic impact of differences in the number of operating refineries. Real income Under scenario 1 real income is reduced by $3,118 million over the 23 weeks under the low elasticity case and $2,148 under the high elasticity case. Under scenario 2 real income loss over the 23 weeks is $3,108 million under the low elasticity case compared to $2,141 million under the high elasticity case. In each scenario, these losses represent just under 0.5 per cent and just over 0.3 per cent of the real income that would be produced over the 23 week period respectively. The larger projected loss in Australia’s real income compared to the change in real GDP can be attributed to the change in of trade arising from the increase in the price of crude oil and petroleum products. The larger difference in real incomes the low and high elasticity cases than arose for GDP can be attributed mainly to the fact that under the low elasticity case, Australia pays higher prices for more crude oil and petroleum products than under the high elasticity case. As a significant proportion of the crude oil and product is imported, the income transfers abroad (via the terms of trade loss) are higher which reduces real incomes. In summary, for the two reasons noted above, the operation of four refineries rather than seven will have a negligible impact on the fall in GDP and in real incomes resulting from the oil supply shock. The impact on real incomes is more significant than the impact on GDP because Australia is a net importer of crude oil and petroleum products and the higher prices paid increases income transfers abroad. This is not offset by higher prices for petroleum exports in the short term.
Impacts for Australia Real GDP The results show that for Scenario 1, Australia’s GDP is $556 million lower over the 23 weeks under the low elasticities case (case A) and $465 million lower under the high elasticities case (case B). These losses represent –0.087 per cent and –0.073 per cent of GDP that would be produced over the 23 week period respectively. The results for Scenario 2 are not significantly different. The reason is first, the nature of the shock (as characterised in Chapter 4) is affecting crude oil margins rather than refinery margins and second, that the impacts are estimated relative to a reference case where only 4 refineries are operating. As discussed earlier, the scenarios are compared to different reference cases, which removes the economic impact of differences in the number of operating refineries. Real income Under scenario 1 real income is reduced by $3,118 million over the 23 weeks under the low elasticity case and $2,148 under the high elasticity case. Under scenario 2 real income loss over the 23 weeks is $3,108 million under the low elasticity case compared to $2,141 million under the high elasticity case. In each scenario, these losses represent just under 0.5 per cent and just over 0.3 per cent of the real income that would be produced over the 23 week period respectively. The larger projected loss in Australia’s real income compared to the change in real GDP can be attributed to the change in of trade arising from the increase in the price of crude oil and petroleum products. The larger difference in real incomes the low and high elasticity cases than arose for GDP can be attributed mainly to the fact that under the low elasticity case, Australia pays higher prices for more crude oil and petroleum products than under the high elasticity case. As a significant proportion of the crude oil and product is imported, the income transfers abroad (via the terms of trade loss) are higher which reduces real incomes. In summary, for the two reasons noted above, the operation of four refineries rather than seven will have a negligible impact on the fall in GDP and in real incomes resulting from the oil supply shock. The impact on real incomes is more significant than the impact on GDP because Australia is a net importer of crude oil and petroleum products and the higher prices paid increases income transfers abroad. This is not offset by higher prices for petroleum exports in the short term.
NESA_IdentifiedIssues-StraitHormuzShockScenario.docx