hybrid vehicles. we can expect similar increases in oil and energy efficiency in the rapidly growing economies of east asia as they respond to the same set of market incentives. but at present, china consumes roughly twice as much oil per dollar of gdp as the united states, and if, as projected, its share of world oil consumption continues to increase, the average improvements in world oil - intensity will be less pronounced than the improvements in individual countries viewed separately would suggest. * * * aside from uncertain demand, the resolution of current major geopolitical uncertainties will materially affect oil prices in the years ahead. the effect on oil prices, in turn, will significantly influence the levels of investment over the next decade in crude oil productive capacity and, only slightly less importantly, investment in refining facilities. because of the geographic concentration of proved reserves, much of the investment in crude oil productive capacity will need to be made in countries where foreign investment is prohibited or restricted or faces considerable political risk. unless those policies and political institutions and attitudes change, a greater proportion of the cash flow of producing countries will be needed for oil re - investment to ensure that capacity keeps up with projected world demand. concerns about potential shortfalls in investment certainly have contributed to recent record - high long - term futures prices. to be sure, world oil supplies and productive capacity continue to expand. major advances in recovery rates from existing reservoirs have enhanced proved reserves despite ever - fewer discoveries of major oil fields. but investment to convert reserves to productive capacity has fallen short of the levels required to match unexpected recent gains in demand, especially gains in china. besides feared shortfalls in crude oil capacity, the status of world refining capacity has become worrisome as well. of special concern is the need to add adequate coking and desulphurization capacity to convert the average gravity and sulphur content of much of the world's crude oil to the lighter and sweeter needs of product markets, which are increasingly dominated by transportation fuels that must meet ever - more stringent environmental requirements. * * * the extraordinary uncertainties about oil prices of late are reminiscent of the early years of oil development. over the past few decades, crude oil prices have been determined largely by international market participants, especially opec. but such was not always the case. in the early twentieth century, pricing power was firmly in the hands of americans, predominately john d. rockefeller and standard oil. reportedly appalled by the volatility of crude oil prices

declines. this means that resource utilisation, measured in terms of gdp, can increase or decrease without there being any simultaneous change in unemployment. neither is it certain, after companies have decided to increase or decrease employment, that this will be reflected by changes in aggregate unemployment. as the size of the labour force also varies, for cyclical reasons among others, the level of unemployment will depend on the extent to which individuals leave, remain in or enter the labour market. … but the connection is not stable monetary policy is forward - looking and must be based on forecasts. the practical conditions for forecasting actual unemployment are made more difficult by changes, over time, in the historical relationship between economic activity and the development of the labour market. during the financial crisis of 2008 – 2009, the riksbank was surprised ( as were other analysts ) to see that unemployment did not increase more, considering the steep fall in aku, 2010. bis central bankers ’ speeches output in the swedish economy. the swedish labour market coped comparatively well, both in comparison with how it is usually affected by falls in gdp and in comparison with developments in many other countries. 6 the former point is illustrated by figure 1. figure 1 unemployment calculated according to okun ’ s law7 per cent of labour force outcome okun 1 ( differences, 1980 - ) okun 2 ( differences, 2001 - ) 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 note : the difference version of okun ’ s law captures the relationship between gdp growth and the change in unemployment. the figure shows unemployment forecasts based on estimates of this relationship in two different time periods. source : the riksbank according to the historical relationship between changes in gdp and changes in unemployment, the change in gdp between the first quarter of 2009 and the third quarter of 2011 should have led unemployment to increase by 1. 5 – 2. 5 percentage points above the actual increase. the functioning of the labour market is decisive. actual unemployment is not only influenced by economic activity, but also by structural factors that shape the functioning of the labour market. these structural factors influence both the decision to enter the labour market and companies ’ decisions to hire and fire. examples of structural factors are the design of the taxation and social insurance systems, see, for example, the article “ the effects of the financial crisis on the labour market – a comparison of sweden,