A World
Bank Paper * expects oil prices to remain soft over the next few years although volatility in oil markets, it says, might persist.
For
the price falls, it offers the
following reasons
·
Oil
supply from unconventional sources, Unconventional and higher-cost oil
producers (i.e. US shale, Canadian oil sands and global bio-fuel production)
may well become the new influence.
·
a
significant change in OPEC’s policy stance,
·
weak
global demand
·
a
strengthening U.S. dollar
·
oil
production in the Middle East has not been disrupted by ongoing conflict,
The World
Bank paper further states:
.
·
An almost 50 percent decline in oil prices could be associated with
a 0.7-0.8 percent increase in global GDP
over the medium term.
·
Low
oil prices should exert downward pressures on other commodity prices,
especially for natural gas, fertilizers, and food commodities.
·
Cheaper
food should benefit a majority of the world’s poor, who are net consumers. With
more than 70 percent of the world's poor living in oil-importing countries, low
oil prices should help in the drive to reduce global poverty.
·
The impact of lower oil prices
for the world economy and developing countries should generally be positive
over the medium term, though oil-exporting nations will be hit adversely.
·
Sharply lower oil prices have dampened
investor sentiment about oil-exporting emerging market economies and could add
to volatility in financial market..
·
For many importers, a side effect has been
slowing inflation, which may temporarily ease pressure on central banks and, in
some cases, could provide room for continued low or lower interest rates or
other accommodative policies in an environment of subdued growth. For
exporters, central banks will have to balance the need to support growth
against the need to contain inflation and currency pressures.
·
While beneficial for the global
economy overall, cheap oil could complicate monetary policy making in economies
that are already grappling with strong deflationary forces.
*World Bank's paper, titled “The Great Plunge in Oil Prices: Causes,
Consequences, and Policy Responses”., authored by John Baffes, Ayhan Kose,
Franziska Ohnsorge, and Marc Stocker,
Without any risk or responsibility.
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