The importance of oil prices to businesses cannot be understated, and neither can the planning difficulties created by their volatility. As recently as June 2014, the Brent spot price for a barrel of oil was more than USD115, but throughout 2016 it regularly flirted with the USD30 per barrel (/b) mark. For governments, meanwhile, volatile oil prices mean unpredictable budget outcomes and potentially untenable current accounts.
This briefing paper highlights the impact of continued low oil prices on the business environment and identifies the economic winners and losers in this context.
The Economic Benefits of Low Oil Prices May be Overstated
At the global level, the traditional rule of thumb has been that an oil price fall of USD10/b would add 0.2 percentage points (pp) to global growth. If the rule were true, oil-price changes should have generated almost 1pp of extra growth in 2015. However, most macroeconomic models suggest the actual effect of oil-price shifts was around 0.5pp of additional growth: so while there has been an overall benefit from low oil prices, it is smaller than conventional economic wisdom would have predicted, and global demand has remained muted.
Learn more about the economic winners and losers of low oil prices by downloading the full report.