Gavyn Davies: Everyone is ignoring the impact of lower oil

Gavyn Davies: Everyone is ignoring the impact of lower oil. Gavyn Davies writes in the FT: The drop in oil prices from $115/barrel for Brent in June to about $90 now should start to boost domestic demand in oil importing counties fairly soon. The IMF last week published a simulation of the downside impact on global growth that would follow an adverse supply shock in the oil market, causing an upward spike in oil prices. Reversing the signs of these simulations, we find that a persistent drop of $25/barrel in oil prices would boost the level of global GDP by about 0.5-1.5 per cent in the second year (depending on financial market and other confidence effects). It is surprising that such a large positive force is being largely ignored in financial markets. Read about this and four other expansionary forces that are likely to offset the malaise in Europe here: (VIEW LINK)


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