The purpose of the study is to investigate impacts of international oil price changes on Taiwan’s economy by using the input-output analysis. The study establishes the price sub-model and output sub-model in the input-output analysis framwork, estimates final demand for household consumption, fixed investment, and import as well as exports, and utilizing the consumption and investment bridge matrices to link final demand to input-output table. Among eight scenario conducted in the study, the price of petroleum refining product increase 10%, no response of electricity and transportation sector price, and utilizing domestic transaction table (or D matrix) mimic the case of year 2004. The result of simulation shows that total producer price will be up 0.17%, CPI up 0.22%, and real total output increase 0.05%, which is similar to the situation in 2004. For the year 2005, the forecast should be based upon assumption on fluctuation of international oil price, and the response of domestic electricity and transportation sectors. If the international oil price maintain the level of the year 2004, the domestic electricity and transportation sectors reflect 10% change of domestic petroleum refining price in the year 2004. In this case, the total producer price is expected to rise 0.27%, the nominal output increases 0.17%, and the real output will drop 0.1% in the short run. The second possibility is the international oil price maintains the level of 2004, but the domestic electricity and transportation sectors reflect 5% change of domestic petroleum refining price. In this case, the producer price is expected to rise 0.13%, the nominal output increases 0.47%, and the real output will increase 0.34%. The third possibility is the international oil price is up to US$50 for West Texas crude oil or US$40 for Dubai crude oil, but the domestic electricity and transportation sectors do not reflect the change of domestic petroleum refining price. In this case, the producer price
