Oil Prices and Consumer Spending in Sweden : -Do Oil Price shocks affect Private Consumption?

This thesis uses a Vector Autoregressive Model and an Impulse response function to examine the impact of rising oil prices on personal consumption expenditure in Sweden. In Sweden the use of fossil oil has been declining for several years, and by 2045, Sweden aims to have no net emissions of greenhouse gases into the atmosphere, although, there is still a lot of oil left in the energy system, not least in the transport sector. As Sweden has continued to reduce its oil dependency and carbon dioxide emissions, it is interesting to investigate whether the international oil price has an impact on the consumption in Swedish households. In this thesis, oil price increases are found to have a negative impact on personal consumption expenditure. The result from this thesis could be an important implication for policymakers deciding about laws and subsidies for renewable energies when facing a trade-off between the environment and private consumption