Are Persistently Lower Oil Prices Good?

9 May 2017
In early 2015, many analysts projected that the plunge in oil prices that had begun in mid-2014, assuming it persisted, would be good overall for many segments of the global economy. Revenues for oil and gas producers and producing countries would decline, certainly, and the industry’s operating environment would become more challenging. But cheaper oil would be a blessing, on balance, for most other sectors and countries. Car-driving consumers, for example, would need to spend less on gasoline, freeing up funds for discretionary spending elsewhere. Oil-related production costs for businesses would decrease, boosting companies’ margins and scope for investment. Some analysts estimated that for every $20-per-barrel decrease in oil prices, global economic growth would expand by 0.4% in the following two to three years.

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