energy

Cheap oil could boost the growth

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Along with the weak Chinese demand, one of the causes of declining oil prices in the world energy market has been highlighted as the increasing production limit of Saudi Arab to “retain” its market share; however, some scholars have the opinion that this was to “expand the market share” in various regions. This decline was seen as an indicator of potential and current gloomy growth, but on the other hand “all recent occasions when the price of oil was halved – 1982-1983, 1985-1986, 1992-1993, 1997-1998, and 2001-2002 – faster global growth followed…and every global recession in the past 50 years has been preceded by a sharp increase in oil prices.” Even metal prices may well increase as the after effects of an oil-price collapse.

  • the world burns 34 billion barrels of oil every year, a $10 fall in the price of oil shifts $340 billion from oil producers to consumers. Thus, the $60 price decline since last August will redistribute more than $2 trillion annually to oil consumers, providing a bigger income boost than the combined US and Chinese fiscal stimulus in 2009.
  • According to the International Monetary Fund, the fall in oil prices this year should boost 2016 GDP by 0.5-1% globally, including growth of 0.3-0.4% in Europe, 1-1.2% in the US, and 1-2% in China.
  • Geopolitics-driven supply boosts are likely in the years ahead.
  • Given the enormous advances in oil-extraction technology since the 1970s and the immense size of Iran’s reserves (the fourth-largest in the world, after Saudi Arabia, Russia, and Venezuela), restoring output to the levels of 40 years ago seems a modest objective of Iran.

(Full story by By Anatole Kaletsky at: https://agenda.weforum.org/2015/08/how-will-cheap-oil-affect-the-global-economy/?utm_content=buffer44c60&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer