London, A few months ago, oil companies were expressing the possibility of crude oil prices reaching $ 100 a barrel, but now things are exactly the opposite. The price of crude oil has reached around $ 50. The question will raise that this fall in the price of crude oil will eventually affect the economy of the world?
Countries that import crude oil, such as India and South Africa, will get the biggest advantage of cheap crude oil. On the other hand, oil producing countries such as Russia and Saudi Arabia will have to face major losses. Increasing interest rate will get relief from stressed Central banks.
Overall, the impact of the fall in the price of oil will depend on the world economy, depending on what kind of oil demand in the world takes shape and how the big oil producing countries react. The global economy has already caught the strength of the dollar and the stigma of the Global Trade War.
Saudi Arabia trapped between Russia
Saudi Arabia, Russia and America have been drinking. While Russia supports Saudi Arabia in supporting the price of oil, American-born Donald Trump is tweeting it to reduce oil prices. Everybody looks at this week’s group meeting on 20 countries, in which it will be interesting to see if there is any consensus on the production between Saudi Arabia and Russia and if the agreement is made, then in the OPEC meeting next week Can be followed.
What is the significance of global growth?
In the Northern Hemisphere, the Jade season is going to begin, in which the fall in oil prices will help the families and companies, because the pace of the economy is sluggish in this season. Countries such as South Africa, which import crude oil, will get the benefit of falling oil prices and their current account deficit will be lower. At the same time, China is the world’s largest importer of crude oil and it is struggling with the cuts in spending between the trade war and domestic challenges with the US.
What will be the impact on inflation?
Lower cost of crude oil means less pressure on inflation and lower pressure on the central bank to increase the main interest rates. According to Bloomberg’s Economic Survey, the fall in oil prices can prove to be a game changer for a country like India and due to this, the RBI can adopt a neutral stance.
What will be the impact on the emerging markets?
According to estimates of Capital Economics analysts, the income of emerging countries, which imports oil by $ 10 per barrel in crude oil barrel, grows at around 0.5 to 0.7 per cent of GDP on an annual basis. At the same time, the reduction in the price of crude oil per barrel by $ 10 will lead to the loss of about three to five percent of GDP on the basis of annual income of most Gulf countries, while for United Arab Emirates, Russia and Nigeria this figure is 1.5 percent of GDP Two percent will be equal.
What will be the impact on America?
Donald Trump has called a reduction in the price of crude oil tax deduction. However, despite the dependence on imports of US oil, it will eliminate the possibility of positive economic results at the industrial level.