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The effect of oil price changes on the balance of trade
(Box)
October 2000
Prices of energy raw materials on world markets are strongly affecting not only changes in
domestic price levels, but also external trade relations. For the Czech Republic, which is largely
dependent on imports of energy raw materials, the price of oil and the price of natural gas, which
is to a large extent derived from it, are an important factor of trade balance and current account
developments. Prices of imported oil are very closely linked to world oil prices. The importance of
this trend for the trade balance has strengthened in recent months owing to the oil price
turbulence on global markets.
In the SITC classification, which divides trade commodities into 10 groups, oil and natural
gas are the main items in Group 3 (Mineral fuels, lubricants and related materials). Prices of Ural
crude are a key medium-term factor for changes in the balance of trade in this group.
Prices in Group 3 accounted for 76% of the overall deterioration of the trade balance in the
first eight months of 2000 (compared with the same period of 1999).
Table 1 Breakdown of deterioration in overall trade balance
(Jan - Aug 2000)
| CZK billions | contribution in % | |
|---|---|---|
| Year-on-year change in balance (Groups 0 - 8) | -43 868 | 100,0 |
| of which: | ||
| changes in material volume of exports and imports | -13 114 | 29,9 |
| price effect in Group 3 | -32890 | 75,0 |
| price effects in other groups | 2 136 | -4,9 |
