


Bloomberg Economics reckons pain not as bad as in 2011. Rising oil has different impacts on different economies



The good news is that Bloomberg Economics found that oil at $100 would mean less for global growth in 2018 than it did after the 2011 spike. That’s partly because economies are less reliant on energy and because the shale revolution cushioning the U.S.


1. What does it mean for global growth?



For a sustained hit to global growth, economists say oil would need to hold above $100. The dollar’s gain of this year doesn’t help though given crude is priced in greenbacks.


Bloomberg Economics found that $100 oil will do more harm than good to global growth. Yet there are important differences in the condition of the world economy today compared with 2011.


3. How will Iran and Trump impact the market?

Geopolitics remains a wild card. Renewed U.S. sanctions on Iran are already crimping the Middle East nation’s oil exports. While President Donald Trump is pressuring the Organization of Petroleum Exporting Countries to pump more, there is limited spare production capacity. In addition, supply from nations including Venezuela, Libya and Nigeria is being buffeted by economic collapse or civil unrest. Still, Goldman Sachs analysts predict $100 will not be passed.

4. Who wins from higher oil prices?

Most of the biggest oil-producing nations are emerging economies. Saudi Arabia leads the way with a net oil production that’s almost 21 percent of gross domestic product as of 2016 -- more than twice that of Russia, which is the next among 15 major emerging markets ranked by Bloomberg Economics. Other winners could include Nigeria and Colombia. The increase in revenues will help to repair budgets and current account deficits, allowing governments to increase spending that will spur investment.

4. Who loses?

India, China, Taiwan, Chile, Turkey, Egypt and Ukraine are among the nations who would take a hit. Paying more for oil will pressure current accounts and make economies more vulnerable to rising U.S. interest rates. Bloomberg Economics has ranked major emerging markets based on vulnerability to shifts in oil prices, U.S. rates and protectionism.


5. What does it mean for the the world’s biggest economy?

A run-up in oil prices poses a lot less of a risk to the U.S. than it used to, thanks to the boom in shale oil production. The old rule of thumb among economists was that a sustained $10 per barrel increase would shave about 0.3 percent off of U.S. output the following year. But tallies now, including that of Moody’s Analytics chief economist Mark Zandi, pencil in a hit of around 0.1 percent.

While the diminishing American reliance on imported oil has positive economic consequences at the industry level, poorer households would feel the weight of higher prices at the pump. They spend about 8 percent of their pre-tax income on gasoline, compared to about one percent for the top fifth of earners.

6. Will it lead to higher inflation around the world?

Energy prices often carry a heavy weight in consumer price gauges, prompting policy makers including those at the Federal Reserve to focus simultaneously on core indexes that remove volatile energy costs. But a substantial run-up in oil prices could provide a more durable uptick for overall inflation if the costs filter through to transportation and utilities.

7. What does it mean for central banks?

If stronger oil prices boost inflation, central bankers on balance will have one less reason to keep monetary policy loose. Among the most-exposed economies, central bankers in India already are warning about the impact as the nation’s biggest import item gets more expensive. Greater overall price pressures also could prompt faster monetary policy tightening in economies such as Thailand, Indonesia, the Philippines and South Africa.

Enda Curran & Michelle Jamrisko

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