Oxford Economics sees 2020 growth slowing if oil prices rise
Czeriza Valencia (The Philippine Star) - April 29, 2019 - 12:00am

MANILA, Philippines — Growth in the country’s gross domestic product (GDP) may drop by as much as 1.2 percent in 2020 if oil prices skyrocket to $100 per barrel by the end of the year, according to UK-based Oxford Economics.

In a new research note, the macroeconomy research firm said that it now sees “increased risks of significantly higher oil prices” as the US government’s move to end waivers on oil imports from Iran by May 1 points to a global supply crunch.

It said that even if Saudi Arabia would likely boost production to partially offset the impact of the US ending waivers on Iranian imports, global spare capacity is being drained.

“We simulate Brent rising to $100 per barrel by the end of 2019 (corresponding to West Texas Institute (WTI) oil reaching $89 per barrel),” Oxford Economics said.

When this happens, global GDP growth may decline by 0.6 percent in 2020 with global inflation rising by 0.7 percentage points.

“The hardest hit economies in 2020 are large oil-importing emerging markets such as the Philippines (minus 1.2 percent to GDP), China (minus 1.1 percent), India (minus one percent), and Argentina (minus 0.9 percent).

Other countries expected to be badly affected are: Turkey (minus 0.9 percent to GDP) and Indonesia (minus 0.8 percent).

“As a proportion of their income, consumers and businesses in advanced economies tend to use oil less intensively and so are less negatively affected,” the firm said.

Oxford Economics said that while there is a possibility that the impending supply crunch would be alleviated by higher production elsewhere, a single supply shock could easily send oil prices to shoot up to $100 per barrel.

But there is hope for longer-term price easing as expectations of high prices in the short term can encourage excess production.

“It is likely that supply impact will be offset by higher production elsewhere, but the market is tightening and all it would take is one more shock to supply (e.g. Nigeria) and oil could reach $100 per barrel,” the firm said.

“Over the longer term, however, we recognize that higher short-term prices could encourage market over-supply and result in lower prices,” it added.

GROSS DOMESTIC PRODUCT OIL PRICES
Philstar
  • Latest
  • Trending
Latest
Are you sure you want to log out?
X
Login

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

SIGN IN
or sign in with