Do High Fuel Prices Pose an Obstacle to Economic Growth? A Study for Poland

Abstract

Great attention has been paid in recent months to high energy prices, including fuel prices. Numerous studies present the threat this poses to economic growth, but history already knows such situations. Therefore, the elementary question was posed: How do fuel prices affect trade and economic growth? The research was based on the Polish economy between 2000 and 2020. Poland is an importer of energy commodities, so it should exhibit strong sensitivity to fuel price changes. A VAR model was created for the Polish economy, including fuel prices, seaborne trade, gross domestic product, and inflation. The results demonstrate that the Polish economy is quite resilient to fuel market turbulence. Obviously enough, it is easier to function in the conditions of lower fuel prices, but high prices are not a reason to panic. Moreover, ongoing technological progress allows economies to weather fuel market crises more easily than was the case back in the 20th century. Therefore, one may unequivocally state that low fuel prices are not a prerequisite for a country’s development. An economy may develop under conditions of higher fuel prices, and panic over high fuel prices only further fuels the inflationary spiral.