THE price of Brent crude oil briefly dipped below $50 a barrel this morning, territory last seen in May 2009 when the world economy was still in deep trouble following the global financial crisis. Oil has fallen by around 55% since its 2014 highpoint of $115 a barrel, thanks largely to increased supply. On balance, the plunge should be a good thing for the world economy, because of the money it saves consumers and businesses in oil-importing countries. Simulations published by the IMF in late December found a gain of 0.3-0.7% for world GDP from the oil-price fall. But it imposes pain on oil exporters, many of which need far higher prices in order to balance their budgets. Even in importing countries, the drop has unwelcome side effects. Falling energy prices helped to drive headline inflation in the euro zone into negative territory in December, heightening the risk that deflationary expectations will become entrenched. Stockmarkets don’t seem that happy either: the prospect of reduced capital expenditure by energy and energy-related firms has helped to push the S&P 500 index down by over 4% since December 29th.
Comment Expiry Date:
via Economic Crisis http://ift.tt/1IqdiJE