John Hemming's Web Log John's Reference Website
Friday, January 25, 2013
  GDP, growth and oil and gas
There are two aspects of fossil fuel production that affect GDP. The first is that higher oil prices tend to reduce economic activity. The second is that if the UK produces less oil or gas then that takes down the GDP. Because this is a geological issue it needs to be excluded from consideration.

The GDP index at the end of Q4 2011 excluding oil and gas was 103.5 and the provisional Q4 2012 figure is 103.9. For some reason ONS make this growth of 0.3% (I make it 0.4% - actually 0.3864%). The figures including oil and gas are 102.8 and 102.9. The ONS make this flat whereas I make it a 0.1% (0.09728%) increase. The reason why the ONS figures and mine are different is that I am comparing the 2011 figure directly to the 2012 figure whereas the ONS are summing the percentage variances (their approach brings in a rounding error). [note it is possible that if the figures are expressed to a greater accuracy that the ONS are right on the rounding, but wrong on the economy being flat in 2012 - as in a number rounded to 102.9 is bigger than a number rounded to 102.8]

It is disappointing, but not surprising that we have growth (including oil and gas) within the potential error of a rounding error. We should focus more on the figures exluding oil and gas as there is little we can do about depleting energy figures.

However, the total figure is the one that affects the tax take and hence issues relating to sovereign debt.

 
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