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Page added on January 8, 2015
Cheap oil will fuel global economy
The slump in oil prices is set to boost the global economy, with crude-importing countries expected to substantially benefit, says the World Bank.
A 10 per cent drop in oil prices would increase gross domestic product in oil-importing countries by 0.1 percentage points to 0.5 percentage points, World Bank research said.
Oil has slipped more than 50 per cent since its 2014 peak, and while the World Bank scenario cannot simply be multiplied, economic growth in oil-importing countries is likely to see a significant boost.
The World Bank’s most recent forecast for global growth in 2015 came out in October, predicting a rise of 3.2 per cent. The bank will release a revised forecast on January 13.
In China, a 10 per cent drop in oil is expected to lift the growth by 0.1 to 0.2 percentage points, so the current slump will likely boost the world’s second-largest economy strongly.
Fund manager BlackRock said in its 2015 outlook that a $US25 fall in oil prices could lead to an uptick of 0.5 percentage points in Chinese GDP. According to BlackRock, the GDP effect on Australia is negligible.
In China, oil accounts for just 18 per cent of energy consumption, while 68 per cent is coal – yet the country is still the world’s second-largest oil importer. The most oil-dependent sectors in China are transportation, petrochemicals and agriculture.
The World Bank estimates that sustained low oil prices in 2015 will widen China’s current account surplus between 0.4 and 0.7 percentage points of GDP.
In other developing economies, lower oil prices can reduce governments’ need to provide fuel subsidies and thus bolster their coffers.
Developing oil-importing economies such as Brazil, India, Indonesia, South Africa and Turkey will all see lower inflation and a reduction in current account deficits thanks to cheap oil.
However, a slowdown in growth from oil-exporting countries could have knock-on ramifications for other emerging and frontier economies, the World Bank warned.
“The flow of so-called ‘petrodollars’ has boosted financial market liquidity, and helped keep borrowing costs down over the past decade,” The World Bank said.
“If oil prices remain low, repatriation of foreign assets could generate capital outflows, and potential financial strains for countries that have become reliant on ‘petro-dollar’ inflows.”
Cheap oil is likely to boost real growth in major economies this year and strengthen calls for monetary stimulus measures in weaker ones, fund management firm Black Rock said.
5 Comments on "Cheap oil will fuel global economy"
Davy on Thu, 8th Jan 2015 6:36 am
More comedy and noise.
Makati1 on Thu, 8th Jan 2015 7:34 am
More comedy from down under.
paulo1 on Thu, 8th Jan 2015 9:32 am
Have you notice both arguments for the US these days? Like ‘Two Face’ (villian of Batman fame), the US will grow now because it is an ‘oil importing country’. 6 months ago the US growth potential wass unimaginable because it is Saudi America and poised to export.
These pundits are still the villians in any story.
penury on Thu, 8th Jan 2015 11:38 am
It really amazes me that people can forget that all economics is represented by the people who sell and the people who buy. If people cannot afford to buy, selling is impossible, Conversly if it is impossible to produce and sell than no one can buy. If the U.S. in its hubris does destroy the economies of the oil producers and the EM that they disagree with politically it will destroy the economy of this country. With 18T in debt mostly owned by Russia,China and Japan perhaps more care should be taken before introducing currency warfare.
bobinget on Thu, 8th Jan 2015 1:19 pm
Not so fast, friends, with this continued “cheap oil”.
It’s been a year of constant warning from this contributor. At last, Boko Haram is headlining. This time overrunning a government military base and slaughtering almost its entire population,
foolish enough to hang around.
From Nigeria, home of lighter oil.
Boko Haram controls large swathes of territory in north-eastern Nigeria
Continue reading the main story
Boko Haram
What now?
New start in US for escapees Watch
Escape from Boko Haram
Battle to free the girls
Nigeria’s militant Islamists have carried out a second attack on the key north-eastern town of Baga, an official has told the BBC.
Boko Haram fighters burnt down almost the entire town on Wednesday, after over-running a military base on Saturday, Musa Alhaji Bukar said.
Bodies lay strewn on Baga’s streets, amid fears that some 2,000 people had been killed in the raids, he added.
Boko Haram launched a military campaign in 2009 to create an Islamic state.
It has taken control of many towns and villages in north-eastern Nigeria in the last year.
The conflict has displaced at least 1.5 million people, while more than 2,000 were killed last year.
Abandoned
On Monday, lawmaker Maina Maaji Lawan said Boko Haram controlled 70% of Borno state, which is worst-affected by the insurgency.
Mr Bukar, a senior government official in the area, said that fleeing residents told him that the town, which had a population of about 10,000, was now “virtually non-existent”.
“It has been burnt down,” he said.
+++++++++++++++++++++++++++++++++++++++++++++++
If your counting “glut oil” related wars, don’t forget
Nigeria. Nigeria’s army may not be paid next month for lack of funding. This is not so much an army as
bag-men in uniforms. The Nigerian army collects
pay-offs from accredited pipeline thieves. Those that don’t pay are busted then shot.
This month even the most accomplished oil thief’s
will have a problem making the ‘nut’.
Not paying off makes breathing difficult with no face.
How does America reconcile buying gasoline when
sooner if not later, we ask our kids to kill Boko Haram’s or Abdullah Azzam Brigades, Abu Sayyaf, al-Gama’s al-Islamiyya, Al-Nusra Front, al-Qaeda in several franchised groups, Al-Shabaab, there are dozens more not the least of which we know as ISIL
“Islamic State of Iran and The Levant”
How many drones does it take to change terrorist
leadership?
(answer) I was afraid to ask.
Is my oil safe tonight?