Colm Keaveney (Galway East, Fianna Fail)
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86. To ask the Minister for Finance with reference to the technical assumptions made on page 5 of the Stability Programme April 2014 update, his estimate of the year-on-year percent change for both real GDP and real GNP if oil were to be $110 per barrel for each year from 2014 to 2018, inclusive; and if he will make a statement on the matter. [19184/14]

Michael Noonan (Limerick City, Fine Gael)
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Relative to other countries in the EU, Ireland has a high energy dependency rate, that is, it is highly dependent on imports to meet domestic energy demands. Eurostat figures show that Ireland's energy dependency rate stood at 85 per cent in 2012, the fourth highest in the EU and over 30 percentage points higher than the EU average of 53 per cent. This dependency leaves Ireland vulnerable to energy price shocks in relative terms. An increase in energy prices above the baseline assumption would, inter alia, reduce household discretionary income by pushing up domestic energy prices. It would also lead to a deterioration in the terms of trade (the ratio of export prices to import prices) which would have a negative impact on Ireland's international competitiveness.

If oil prices were to rise significantly higher than the Department's baseline assumption this would also negatively impact on growth in our main trading partners and would therefore lead to a fall in demand for Irish exports internationally. In this regard the Sensitivity Analysis chapter in the recently published Ireland's Stability Programme April 2014 Update (tinyurl.com/spu14), may prove informative. As part of this analysis a quantitative estimate of the impact of a 1 per cent variation in world output on Irish output was prepared (this can be found on page 26). The analysis suggests that such a shock would decrease Irish GDP by around 1 per cent by 2018, due to the openness of the Irish economy. It should be remembered that, at the margin, these estimates are broadly symmetrical so any unanticipated decline in energy prices would be likely to result in a net positive impact for the Irish economy.

While there is little Ireland can do in the short term to counter the impact of an increase in the price of oil,  the Department of  Communications, Energy and Natural Resources has set out ambitious targets to 2020 for increasing the contribution of renewable sources of energy which are aimed at optimising energy efficiency in Ireland.