Séamus Kirk (Louth, Fianna Fail)
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126. To ask the Minister for Finance if his Department has endeavoured to quantify the benefit to the economy of the reduction in cost of brent crude oil; and if he will provide figures for same. [49434/14]

Michael Noonan (Limerick City, Fine Gael)
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The price of brent crude oil has fallen by about 45 per cent in euro terms (nearly 50 per cent in US dollar terms) since the end of September, when the macroeconomic projections that underpin Budget 2015 were finalised. For the most part this is a positive development, and will likely have a favourable impact on real economic activity in Ireland.

Ireland is a net energy importer and, as such, falls in oil prices have a positive impact in the short term. Lower energy prices reduce firms' input costs thereby improving profitability and  competitiveness. At the household level, lower energy prices are likely to lead to an increase in real disposable incomes, which can be used to reduce indebtedness or increase consumption on other goods and services.

In terms of quantifying the impact, a reasonable rule of thumb is that, everything else being equal, each sustained €10 per barrel reduction in the price of oil boosts the level of real GDP by somewhere in the region 0.1 - 0.2 percentage points.

The decline in oil prices will also reduce inflation.  At the level of the euro area, the latest figures show that inflation moved into negative territory in December for the first time since 2009.  Falling oil prices will further weigh on inflation in the short-term.  If expectations of falling prices were to become entrenched, the negative impact on the euro area economy could potentially be severe.