Just a couple of months ago, major oil trading houses were predicting the return of $100 crude. Now, with oil prices at half that level, here’s a look at what the slump means for the world economy.
Energy importers like 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 get a reprieve; those looking to revive prices, such as the Bank of Japan, face another headwind.
Ultimately, much depends on how world oil demand shapes up as it gets battered by a stronger dollar and global trade spats, and how the biggest producers react.
Saudi Arabia sits between Russia on one side, its ally in managing production to support prices, and the U.S., where President Donald Trump is sending Twitter messages to the producer to get prices down. All eyes are on the Group of 20 meeting this week to see if a consensus on output emerges between the Saudis and Russians, and if that can carry through to the OPEC gathering next week.
Here’s a Bloomberg Economics chart showing net oil imports (or exports) as a percentage of GDP — cheaper oil helps those at the top of the chart and hurts those at the bottom.
What does it mean for global growth?
With the northern hemisphere winter approaching, the oil-price slump will cushion households and businesses during a period of slowing economic growth. Countries that import oil and have current-account deficits, such as South Africa, also will stand to benefit. China is the world’s biggest importer of oil and is already battling a broader moderation in its economy amid a trade war with the U.S. and domestic challenges.