What does oil at $ 50 a barrel mean for the global economy?

HONG KONG (27 November): Only a few months ago, the main oil trading houses planned to return US $ 100 worth of crude oil. Now, with oil prices at half this level, here's a snapshot of what the recession means for the global economy.

Energy importers such as India and South Africa will benefit; oil producers such as Russia and Saudi Arabia will hurt. Central banks under pressure to raise interest rates will benefit from a stay; those seeking to restore prices, like the Bank of Japan, are facing another adverse wind.

In the end, it all depends on how global oil demand will be shaped by a strong dollar and the rise in world trade, as well as the reaction of the biggest producers.

Saudi Arabia lies between Russia on one side, its ally in production management to support prices, and the United States, where President Donald Trump sends Twitter messages to the producer to make lower prices. All eyes are on the meeting of the Group of 20 this week to see if there is a consensus on the outcome of the negotiations between the Saudis and Russians, and if that can continue until the meeting of the Group of 20 OPEC next week.

Here's a Bloomberg Economics chart showing net oil imports (or exports) as a percentage of GDP – cheaper oil helps people at the top of the chart and hurts those at the bottom.

What does this mean for global growth?

As winter approaches in the northern hemisphere, falling oil prices will protect households and businesses during periods of slower economic growth. Oil-importing and current-account deficit countries, such as South Africa, will also benefit. China is the largest oil importer in the world and is already struggling against further moderation of its economy in the context of a trade war with the United States and national challenges.

What does this mean for inflation?

The decline in oil prices means less pressure on inflation and less pressure on central banks to raise interest rates. An example: Bloomberg Economics says the energy crisis is changing the deal for India and could mean that the Reserve Bank of India takes a neutral outlook.

How are emerging markets going to manage falling prices?

Each drop in oil prices of 10 USD per barrel increases revenues from about 0.5% to 0.7% of the gross domestic product of major emerging market oil importers, say analysts at Capital Economics. The same reduction will lead to a GDP loss of 3% to 5% in most Gulf economies and a 1.5% to 2% slowdown in GDP in the United Arab Emirates, Russia and Nigeria, all on the same basis. annual, according to analysts. .

What does this mean for the world's largest economy?

Trump has described the fall in oil prices as the equivalent of a tax cut. Nevertheless, the decline in US dependence on imported oil due to the emergence of shale production will negatively impact the economic benefits to the industry.