The direct effect of the oil price on the global macroeconomic picture is far from clear. While oil does affect inflation and growth it is far from the primary driver, and higher oil prices can impact countries in very different ways. In addition, supply and demand considerations cannot be ignored, but these factors are not cause for alarm at present. While the situation is certainly fluid, we are not jumping to any conclusions on the longer-term price trend of oil based on a thus far delimited – if dramatic – event. A fluid situation If higher oil prices persist due to major supply shortages this would be a headwind for global growth, but even this would be unlikely to tip the balance on the overall growth trajectory. Similarly, some investors fear the impact of oil on inflation. But while the relatively subdued oil price has certainly contributed to lower inflation since mid-2014, low inflation is a structural issue and oil is not the determining factor here. In the US, a higher oil price does negatively impact the consumer, but it also boosts capital expenditures in the US energy sector, effectively reducing the impact of oil’s inflationary pressures. In addition, […]
