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erly contractionary monetary and fiscal policies to contain inflationary force could worsen the recessionary income and unemployment effects. On the other hand, expansionary monetary and fiscal policies can also delay the fall in income demanded by the increases in oil prices, stoke up inflationary pressures and worsen the impact of higher prices in the long run.

Ever since the first oil shock, OCED countries are still at risk to increase in oil prices. After the oil shock there has been a decline in oil quality and net oil import.Net imports fell by 14% while the amount of oil the OECD used to produce one dollar of real GDP divided between 1973 and 2006. However, the area still greatly relied on the needs of imported of oil, reaching to 56% in 2006. Only Canada, Denmark, Mexico, Norway and the United Kingdom are currently net exporting countries. Oil imports are estimated to have cost the region as a whole over $360 billion in 2006 which is equal to around 1% of GDP. Since 2005 the yearly import bill has increased by about 30 %. In the short term OECD economic performance will have a lesser impact, however in the long term their impact is more limited. As a result of the rate of GDP growth, there was a drop in trade that forced a decrease in income during the first two years. Those in turn cause a significant decline in domestic consumption and investment. Compare to the base case, the OECD GDP is decrease by 0.4% in 2005 and 2006.In all OECD region, As global trade in nonoil goods and services progress the lose start to get weaker in the following year. Throughout the whole five-year projection period, GDP is 0.3% lower on average. The shock of higher oil prices on the rate of inflation is clearer. The consumer price is on average 0.5% higher than in the base case over the five year projection period. In 2006 is when it has a great impact on the rate of inflation which causes it to fall dramatically. In recent development shows a clear correlation between oil price movements and short term changes in the inflation rate. The economic impact of higher oil prices is deferent depending on OECD countries which mainly to which they are net importers of oil. Euro zone countries, which are base on oil imports therefore they are very reliant on oil import as a result they suffer the most in the short term. GDP losses in both Europe and Japan would also worsen budget shortage, which are already large close to 3% on average in the euro zone and 7% in Japan. The United States suffers the least, mainly because original production still meets over 40% of its oil needs.

Because of the horrible economic impact of higher oil prices, the effect is shown more obvious on oil importing developing countries than for OECD countries. As for the poorer country and country that are in debt, the economic impact on them would be more severe. In the beginning of IMF estimates, the drop in GDP would equal more than 1.5% after one year in those countries. The Sub Saharan African countries with more oil demanding and weak economies would have a greater decreased in GDP which would result of more than 3%. As with OECD countries, dollar exchange rates will stay the same in the base case. Asia in which they imports most of their oil, would experience a 0.8% decrease in economic output and after one year of price raising, in the following year have shown on the GDP that The current account balance had weaken by 1% Some countries would suffe