50 dollars a barrel of oil: what does it mean for the economy? – Blitz

At the beginning of October, US light crude oil traded at around $ 77 per barrel, but has since lost a third of its value and is now worth just over $ 50.

What does this mean for the global economy? Bloomberg gives some examples of the possible effects of the fall of "black gold":

Who wins and who loses?

Large energy importers, such as India and South Africa, will certainly be on the winning side, while major manufacturers such as Russia and Saudi Arabia will lose.

Central banks, under pressure to raise interest rates, can take a sip of air as falling fuel prices lead to a drop in inflation. On the other hand, those who seek to stimulate it, like the Bank of Japan, will have to face new problems.

The evolution of the situation depends largely on the evolution of demand in the coming months under the influence of the strong dollar, escalating tensions in trade relations and the reaction of the major oil producers.

Saudi Arabia is trying to reconcile the interests of Russia, its partner in controlled mining, and those of US President Donald Trump, who advocates for freeing supply and lowering prices .

This week's eyes will be on the G20 summit, which should make it clear whether Moscow and Riyadh will reach a consensus on production quotas. It will also depend on the decisions of the OPEC countries that will be held next week.

What will happen to global economic growth?

In the northern hemisphere, winter is already approaching and low oil prices will help businesses and citizens reduce their heating costs in a context of slowing economic growth. Countries importing oil and maintaining a negative balance on their current accounts will benefit from lower commodity prices.

For example, China, the world's largest oil importer, is already struggling with the slowdown in its economy and the negative effects of escalating trade conflict with the United States. The group of major importers also includes South Korea, South Africa, India and Turkey.

How will this affect inflation?

Low oil prices have reduced inflationary pressures and weakened pressure on central banks to raise interest rates. In India, for example, this trend could change the view of the central bank in the coming months. The institution was preparing for new interest rates, but the drop in consumer price growth could delay this decision.

How are emerging markets going to react?

Any reduction in the price of oil by $ 10 brings about 0.5 to 0.7 per cent growth in the gross domestic product of the importing states, according to Bloomberg statistics.

However, the same slowdown has resulted in a decline in Gulf States GDP of between 3% and 5% per annum. In Russia and Nigeria, the negative effect is between 1.5 and 2% of GDP.

How does cheap oil affect the world's largest economy?

US President Donald Trump believes that the depreciation of "black gold" equates to a reduction in taxes. In recent years, the United States has significantly reduced its dependence on oil imports through the "revolutionary shroud".

This however means that the problems facing American shale companies undermine the positive effects of lower fuel prices. With a barrel of oil at $ 50, many of them will not go green, warn experts quoted by the publication.