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Offbeat The global economic impact of $100 oil 'isn't trivial': Here are the likely winners and losers

15:52  11 october  2018
15:52  11 october  2018 Source:   cnbc.com

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Such a shift has global consequences. Who are the winners and losers ? If increased supply is the driving force, the effect is likely to be bigger—as in America, where shale gas drove prices The years of $ 100 -a-barrel oil also saw the rise of a “Beijing consensus” towards more economic interventionism.

Falling oil prices mean energy exporters are losing revenue while consumers in importing nations are paying less for their energy.

a man riding on the back of a truck© Provided by CNBC LLC

The prospect of an abrupt supply shock in the energy market is making investors increasingly nervous about the possibility of oil prices soaring above $100 a barrel before year-end.

Oil prices have surged more than 25 percent this year, prompting investors to bet that a return to triple-digits could be just around the corner.

It comes as market players closely monitor a flurry of supply concerns, with looming United States sanctions against Iran , bottlenecks building in the U.S. shale industry and the collapse of Venezuela's economy all intensifying an upside risk in the market.

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And here 's another from Hui highlighting the degree to which specific oil -producing countries have In fact, the gap between global growth and Brent crude mirrors the underperformance seen above between $ 100 oil hinges on whichever policy wins out. Copyright The Financial Times Limited 2018.

By David Sterman. As we move into 2011, economists increasingly believe that the United States and Europe will start to see an economic rebound, joining China, Brazil, India and other emerging economies in a full-fledged global economic upturn.

Sensitive market conditions

Cailin Birch, senior commodities analyst at the Economist Intelligence Unit, told CNBC on Thursday that crude futures appeared uniquely "sensitive" to market commentary at present, "with policy and messaging having an exaggerated impact on prices."

"And, clearly, what is particularly important right now is the prospect of Iranian sanctions," Birch said.

President Donald Trump's administration is scheduled to impose crude sanctions against Iran from November 4. The sanctions are widely expected to have an immediate impact on OPEC's third-largest producer, although estimates of exactly how much of the country's oil could disappear vary widely.

Some energy market analysts expect around 500,000 barrels per day (bpd) to disappear once U.S. sanctions against Iran come into force, while others have warned as much as 2 million bpd could come offline over the coming weeks.

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Oil prices are likely to increase to per barrel in the next couple of years, but not return to $ 100 per barrel.9. The winners and the losers . Lower oil prices will result in a redistribution of resources. In the long term, diversifying the economy away from oil can help cushion the impact of low oil prices

The first winner is the world economy itself. A 10% change in the oil price is associated with around a 0.2% change in global GDP, says Tom Helbling of If increased supply is the driving force, the effect is likely to be bigger--as in America, where shale gas drove prices down relative to Europe and, says

a small boat in a body of water: The Persian Gulf Islands© Provided by CNBC LLC The Persian Gulf Islands

Washington has also ratcheted up the pressure on global buyers of Iranian crude by demanding they completely cut-off the Islamic Republic. The move is part of a sustained effort to undermine Iran's crude industry, in a bid to force the country to negotiate a new nuclear agreement.

However, the U.S. has since said it could consider exemptions for countries that have already shown efforts to reduce their imports of Iranian oil.

When asked whether the Trump administration's recent suggestion of possible waivers and exemptions had fuelled market uncertainty, Birch replied: "Definitely. This kind of mixed messaging is just one step forward and then one step back."

Biggest losers

"Putting everything together, we think $100 oil could take two tenths off global growth in 2019. This is not a major impact, but it isn't trivial either," economists at Bank of America Merrill Lynch said in a research note published Friday.

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There will be winners and losers , but economists are divided on the overall impact . Falling oil prices could be “a shot in the arm” for the global economy , according to the International Monetary Fund. The fund estimates the recent drop in oil prices could add up to 0.7% to global economic output in 2015.

Major oil companies are also facing challenges from the oil price, with BP cutting hundreds of jobs and its rivals suffering share price declines in recent months. It was clear to most analysts that the decline in Brent crude from its 2014 peak was the result of a slowdown in global growth, in part the result of

On Tuesday, the International Monetary Fund (IMF) cut its global economic forecasts for 2018 and 2019 by 0.2 percentage points to 3.7 percent. The Washington D.C.-based institute also raised concerns that demand for oil may slump over the coming months.

"The countries that stand to lose from higher oil prices have historically been much more systemically important to the global economy and financial markets than oil exporters," said Bank of America Merrill Lynch's Ethan Harris and Aditya Bhave.

This means that – while the U.S. has become better protected by a recent shale boom, the euro area, Japan, China and India would "stand to lose significantly from a spike in oil prices."

Analysts at the Bank of America Merrill Lynch expect economic growth in the euro area, U.K. and Japan to be depressed by as much as 0.5 percentage points if oil prices spike to $100 a barrel by year-end – and remain close to that level throughout 2019.

Weakness in developed Europe would then most likely "exacerbate the shock" to central and eastern Europe, while other emerging markets that would probably "see weaker growth by a few tenths include India, Chile, Peru and the Dominican Republic," the bank said.

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Here ’s Richard Bibbey of HSBC: “We’ll likely see a short period of consolidation before a further period lower. As a consumer, when will I start feeling the impact of this? Your fuel tank is probably going to cost A year ago, £ 100 would have secured 0 in Australia, one of the most popular retirement

Loser : Oil -producing state economies . As the American economy has struggled to recover in the last few But is the “Texas Economic Miracle” just an artifact of high energy prices and improving Winner and Loser : Central bankers. Anybody who has fretted that years of money-printing by global

Who wins at $100 a barrel?

Oil importers are widely expected to be the biggest beneficiaries if oil prices climb towards triple digits.

"Assuming no new sanctions, we would expect 1.8 percent GDP growth in Russia next year, compared to our baseline of 1.2 percent," economists at Bank of America Merrill Lynch said.

"In Saudi Arabia, much will depend on how much of the oil windfall revenue gets spent by the government. In the extreme case, if it is all spent, non-oil real GDP growth could increase by nearly 1 percent," they added.

Meanwhile, investment in the oil and gas sector could see Colombia's growth rate accelerate by 0.6 percent, the analysts said, while Malaysia would most likely be one of the very few beneficiaries in Asia.

Selling opportunity

"Trump's sanctions have raised the stakes, and the market is now driven by fear," Konstantinos Venetis, senior economist at TS Lombard, said in a research note published Monday.

"But at this juncture we think it makes sense to lean against further oil price strength instead of chasing this rally. And if we see $100 on short notice, it would probably be as good a selling opportunity as in July 2008," he added.

Oil prices skyrocketed to record highs in July 2008, reaching levels of around $147 a barrel before plummeting down to below $30 as the global economic crisis began to bite.

International benchmark Brent crude traded at around $81.44 on Thursday, down around 2 percent, while U.S. West Texas Intermediate (WTI) stood at around $71.85, more than 1.8 percent lower.

"Overall we would put an oil shock in the top three of our concerns over the next year along with trade wars and the 'exit-sential' risks in Europe," economists at Bank of America Merrill Lynch said.

China's central bank still has plenty of tools to counter detrimental trade war effect: Governor .
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