Naturally, an economy's dependency on oil holds great influence over the effects of a price hike. Lastly, fiscal and monetary responses shape the course of an economy's growth during periods of mounting oil prices. Domestic policy reactions establish the degree of success with which a nation manages changes in oil prices.

             While importing oil countries typically undergo declining economic growth during oil price hikes, exporting oil countries generally experience robust economic growth. 'For net oil-exporting countries, a price increase directly increases real national income through higher export earnings' (Birol, 2004, p.3). It is reasonable that during times of escalating oil prices, oil-exporting countries are able to spend more freely than during oil price slumps. However, 'the impact of higher oil prices on growth and activity in oil producing countries will depend on a variety of factors, most importantly how these windfall oil revenues are spent' (IMF, 2000, p. 24). Some nations may elect to replenish their caches while others may utilize the additional income to curb spending restraints in the future--for example, during periods of waning oil prices (IMF, 2000, p. 26). Moreover, exporting oil nations may capitalize on 'lower external borrowing costs' (IMF, 2000, p. 26) during periods of rising oil prices. .

             Macro-economic history clearly illustrates the transfer of income during oil shocks. The above said effects on importing oil countries were evident with the 1973 oil price increase as 'direct terms of trade loss.[were] equivalent to around 2 1/2 percent of GDP in the OECD [Organization for Economic Cooperation and Development] area' (IMF, 2000, p. 37). Conversely, OPEC countries experienced an economic boom during this period. The oil shock of 1979, during which the price of oil doubled within 2 quarters, also contributed to a global recession; the GDP of advanced countries fell 3 1/2 percent (IMF, 2000, p.