Anatomy of a Global Energy Price Shock: How the Scenario Was Built

The other posts in this series report what happens when a global energy price shock hits — trillions in output lost, millions of jobs at risk. This post steps back to examine two things together: the price increases that were actually applied to each country, and the output losses those increases produced. Understanding both sides of the scenario — the input shock and the economic response — is essential for interpreting any single result.

A uniform shock would imply that every economy is equally exposed to global fossil fuel markets, which is empirically false. The scenario used here is calibrated to reflect the structural heterogeneity in how countries produce, import, and consume energy. The resulting pattern of price increases, and the losses they generate, reveals as much about the global energy landscape as any model result.

The Two Shocks

The scenario applies simultaneous price increases to two fossil fuel sectors across 164 economies in the GLORIA global multi-region input-output database:

The petroleum shock is calibrated using each country’s actual petroleum import intensity from the GLORIA trade database. Economies that depend heavily on imported refined petroleum absorb a larger effective price increase; those with significant domestic production are partially insulated. The natural gas shock, by contrast, is applied uniformly to calibrated countries — a modeling choice reflecting the globally interconnected nature of LNG spot markets, where regional price differentiation has narrowed considerably since the 2022 European gas crisis.

These magnitudes are grounded in recent experience. The 2022 energy crisis following Russia’s invasion of Ukraine saw Brent crude prices rise 50 to 70 percent and European TTF natural gas prices spike by over 1,000 percent at their peak (IEA, 2022). Our petroleum shock sits within historical range; the gas shock is deliberately more moderate, representing a severe but globally diffused disruption rather than the acute regional dislocation that actually occurred.

A note on coverage. Sixteen economies present in the GLORIA database — including Saudi Arabia, Russia, Qatar, Singapore, and Venezuela — do not appear in the scenario’s country-level calibration file. They receive only the universal baseline petroleum shock of 12% and no gas shock. This is important context for the aggregated charts below: their inclusion pulls regional and grouping averages modestly downward, particularly for Middle East & North Africa (which gains Saudi Arabia, Qatar, and Yemen) and for oil exporters (which gains several major producers). The affected countries are identified where relevant.

Price Increases by Country Grouping

The interactive chart below shows average price increases across four groupings: World Bank region, income level, oil trade position, and oil consumption intensity. Use the dropdowns to switch between petroleum and gas, and between groupings.

By Region

The regional breakdown reveals a clear split between the developed-economy core and lower-integration periphery. North America (43.2%), Latin America & Caribbean (42.5%), and Europe & Central Asia (41.9%) cluster tightly at the top of the petroleum shock distribution. East Asia & Pacific (40.6%) and Middle East & North Africa (37.9%) follow at a modest distance. Sub-Saharan Africa (26.8%) and South Asia (25.7%) receive the smallest average shocks.

This ordering is driven almost entirely by petroleum trade integration. The high-shock regions have economies deeply embedded in global refined petroleum markets, with energy-intensive industrial sectors that transmit world price changes quickly into domestic production costs. The low-shock regions — particularly Sub-Saharan Africa — include many economies with small formal industrial sectors and limited direct petroleum trade exposure.

The MENA anomaly. At first glance, the Middle East & North Africa sitting below North America and Europe may seem surprising for a region synonymous with oil. Two forces explain it. First, the 16 countries added from outside the original calibration file include eight MENA economies (Saudi Arabia, Qatar, Yemen, Syria, Palestine, Tunisia, Libya via existing calibration, and Jordan already calibrated). Of these, Saudi Arabia, Qatar, and Yemen — together representing the region’s largest exporters — received only the 12% universal baseline rather than a fully calibrated shock. This mechanically pulls the MENA average down. Second, even among calibrated MENA countries, major net importers like Jordan (59.2%) and Greece-adjacent economies pull in opposite directions from the Gulf exporters whose calibrated shocks can be lower when domestic pricing is factored in.

South Asia’s insulation. South Asia’s low average (25.7%) is anchored by India, which has a large domestic refining sector. The distinction between importing crude and importing refined petroleum matters: importing crude exposes the economy to crude price risk but not to the full markup embedded in refined product prices. India’s refining capacity provides a degree of insulation that the scenario captures.

By Income

The income gradient is the most interpretively clean pattern in the data. High-income countries average a 43.6% petroleum shock, middle-income countries 36.9%, and low-income countries 25.1%. The spread is roughly 18 percentage points from top to bottom.

This gradient reflects the deeper integration of wealthier economies into global petroleum supply chains — more petroleum-intensive manufacturing, more liberalized domestic energy pricing that transmits global signals fully, and fewer administered price buffers. Low-income countries, by contrast, have smaller formal industrial sectors and are often partially shielded by fuel subsidies or regulated pricing — though this protection carries fiscal costs not modeled here.

It is worth flagging a modeling limitation: the scenario captures production-cost channels faithfully but does not fully capture welfare effects in low-income settings, where even a modest price increase can have severe distributional consequences through food and transport inflation.

Exporters vs. Importers: A Narrowed Gap

With 164 countries, oil exporters average 39.5% and importers 36.4% — a 3-point gap that is considerably smaller than the 10-point differential in the original 148-country calibration. The convergence is almost entirely attributable to the new exporters added: Saudi Arabia, Russia, Qatar, Venezuela, Turkmenistan, Chad, and South Sudan all enter the exporter group with the 12% universal baseline, which substantially lowers the exporter average.

In the 148-country calibration, exporters were assigned high calibrated shocks reflecting opportunity-cost pricing logic — even domestic petroleum consumers face higher implicit costs when world prices rise. The new exporters, lacking individual calibration, don’t carry this adjustment. The 10-point exporter premium seen in the original scenario was therefore a real feature of the model design, not a statistical artefact — and will re-emerge if these countries are individually calibrated in a future version.

High vs. Low Consumption

High-consumption economies average 44.3% petroleum shock versus 32.9% for low-consumption ones — an 11-point gap. This is one of the most stable differentials across both the 148- and 164-country data, because oil consumption intensity is highly correlated with petroleum trade integration and energy-intensive industrial structure. Countries with large vehicle fleets, heavy manufacturing, and petrochemical sectors face both higher absolute petroleum use and higher price pass-through rates.

The Natural Gas Shock: Now Non-Uniform in Aggregate

With 16 countries receiving zero gas shock, group averages for gas are no longer uniformly 81.8%. The effect is largest for MENA (61.3%, reflecting Saudi Arabia, Qatar, Yemen, Syria, and Palestine all at 0%) and for oil exporters (62.0%, for the same reasons). The gas chart in the visualization above documents these differences clearly.

This is technically an artifact of missing calibration rather than a substantive modeling choice — but it is informative nonetheless. It identifies the countries where gas shock transmission was not individually specified, and where future calibration work would have the largest effect on results.

From Price Shock to Output Loss

The price increases described above feed into the MINDSET model, which traces their propagation through production networks, trade flows, household demand, and investment. The result is an estimated output loss for each country — the decline in total production value relative to the baseline.

The chart below shows average output loss across the same four groupings. Two metrics are shown simultaneously: the left-axis bars give absolute average loss in US dollars per country (billions), while the right-axis dots give the average percentage loss relative to total output. These two dimensions tell different stories — absolute losses reflect economic size, while percentage losses reveal relative vulnerability.

Patterns in the Output Loss Data

By Region: Size vs. Vulnerability

The absolute output loss chart is dominated by North America ($211.5 bn average per country), East Asia & Pacific ($47.6 bn), and South Asia ($21.4 bn). These numbers largely reflect economic size: the US and Canada are the only North American economies in the dataset, and both are very large. East Asia & Pacific includes China, Japan, and South Korea — three of the world’s largest economies. South Asia is anchored by India.

The percentage-loss picture tells a more policy-relevant story. Middle East & North Africa tops the vulnerability ranking at 2.62%, followed by Latin America & Caribbean at 2.46%. North America, despite its enormous absolute losses, records the smallest percentage hit at 0.93% — meaning the shock is large in dollar terms but small relative to the size of the economy.

This divergence between absolute and relative exposure is the central interpretive tension in the regional chart. A country like the US absorbs a large dollar loss but its deep and diversified economy absorbs the shock without severe disruption. A smaller economy in MENA or LAC facing a 2.5%+ output loss has much less capacity to cushion the blow through reserves, fiscal space, or alternative supply chains.

MENA at the top of the vulnerability ranking partially reflects the composition of the group: it includes both large-shock petroleum importers (Jordan, Morocco, Egypt) and major exporters (UAE, Kuwait, Iraq) that receive large price shocks even as they also benefit from export revenues — a benefit not captured in output loss alone. Exporter revenue gains are a separate model channel. The output loss figures here capture only the production-side cost impact.

By Income: The Reversal

The income-level output loss chart shows a counterintuitive pattern at first glance: middle-income countries record the highest percentage output loss (2.14%), above both low-income (1.61%) and high-income (1.87%) groups.

This is not anomalous — it reflects the composition of the middle-income group. The 84 middle-income countries include some of the world’s most energy-intensive emerging economies: China, Brazil, India (lower-middle), Turkey, Indonesia, Mexico, and South Africa. These economies combine high petroleum and gas intensity in their production structures with deep integration into global supply chains — a combination that amplifies the transmission of energy price shocks through the input-output network.

High-income countries face the largest calibrated price shocks (43.6% petroleum on average), but their diversified service-sector economies and stronger adjustment capacity moderate the output loss relative to the shock size. Low-income countries face the smallest price shocks (25.1%) and — because much of their economic activity is in low-energy-intensity agriculture and informal services — also record the smallest percentage output losses. This does not mean they are unaffected in welfare terms; the household consumption and food price channels operate separately.

Exporters vs. Importers: The Imbalance in Absolute Losses

Oil importers record larger absolute losses ($18.1 bn per country on average) than exporters ($11.1 bn), which is expected given that importers face higher effective supply costs without the offsetting export revenue gain. But exporters record higher percentage losses (2.59% vs. 1.80%).

This last result — exporters losing more as a share of output — reflects two things. First, exporters tend to be smaller economies on average than importers (which include large countries like the US, China, Germany, Japan). A moderate dollar loss represents a larger share of a smaller base. Second, major exporters in this group include several Gulf states whose production structures are heavily petroleum-intensive, amplifying the percentage impact even when export revenues rise.

Important caveat on the new exporters. As noted in the price shock section above, eight of the 16 newly added countries are oil exporters, all receiving the 12% universal baseline rather than individually calibrated shocks. Their lower-than-typical shocks pull down the exporter group’s average output loss. If they were fully calibrated, the exporter percentage loss figure would likely rise, potentially widening the gap with importers further.

High vs. Low Consumption: A Closing Gap

High-consumption economies average $38.5 bn in absolute losses against $4.5 bn for low-consumption — a 9x ratio driven by the economic size differential. But the percentage-loss gap is narrow: 1.99% versus 1.98%. This near-equality suggests that while consumption intensity amplifies the dollar magnitude of losses, it does not dramatically change the relative vulnerability once economic size is controlled for. The high-consumption group’s higher absolute price shock (44.3% vs. 32.9%) is largely offset by the deeper absorptive capacity of larger, more diversified economies.

Reading Both Charts Together

The price shock and output loss data are most informative when read alongside each other, because the relationship between shock size and output loss is not one-to-one.

MENA faces a lower average petroleum shock than North America, LAC, or ECA — yet it records the highest percentage output loss. This suggests the MENA production structure (more energy-intensive, less service-sector buffering) amplifies shocks rather than absorbing them. Conversely, North America faces a high calibrated shock but produces the lowest percentage output loss, reflecting the depth and diversification of US and Canadian production networks.

The exporter-importer comparison tells a similar story in reverse: exporters face higher percentage losses despite lower absolute shocks, because many are small, petroleum-dependent economies where the shock reverberates through the input-output network more completely.

These patterns point toward a general principle: the size of the shock matters, but the structure of the economy determines how much of that shock becomes permanent output loss. Countries with diversified supply chains, large service sectors, and strong fiscal positions absorb energy shocks as manageable costs. Countries with concentrated production structures, limited fiscal space, and high petroleum dependency face the same shock as a structural disruption.

Data and Classification Sources

Country-level price shock data are from the MINDSET GLORIA model scenario file. Output loss data are from the MINDSET model results. Country classifications draw on:

• World Bank region and income level: World Bank Country and Lending Groups (2025)
• Oil exporter/importer status: based on net trade position from U.S. EIA International Energy Statistics and OPEC membership
• Oil consumption level: per-capita consumption data from IEA World Energy Balances and U.S. EIA

The classification file covering all 164 GLORIA economies — with region, income group, trade position, consumption level, and scenario price shocks — is available as a downloadable CSV.

For model results on employment effects, see the companion post: 24 Million Jobs at Risk.