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Lower crude prices won’t boost global economies: Moody’s

by ChemOrbis Editorial Team -
  • 11/02/2015 (13:21)
According to a statement dated February 10 by Moody’s Investors Service, although lower crude oil prices are expected to remain in place in 2015, other factors will prevent lower crude from creating a major positive impact on the global economy. According to Moody’s, the US and India will be the primary beneficiaries of lower oil prices.

Moody’s stated that plunging crude oil prices will encourage consumers to spend more in other sectors of the economy on the back of decreasing fuel costs. Moody’s raised its growth forecasts for the US economy to 3.2% in 2015 and 2.8%in 2016 and for the Indian economy to 7% in 2016 compared with a growth rate of 5% in 2014.

However, Moody’s stated that for oil exporting countries like Saudi Arabia and Russia, the slump in crude oil prices will continue to put downward pressure on growth. Russia’s recession is likely to continue until 2017 while Saudi Arabia may increase spending to offset sharp declines in oil revenues.

China will also see limited benefit from lower crude prices as high energy taxes and government-controlled prices in some energy and transport sectors will limit the impact of lower oil prices. Moody’s forecasts that China’s economic growth will fall below 7% in 2015 after growing 7.4% in 2014 and will see further slowing to 6.5% in 2016.

For the eurozone, meanwhile, high unemployment and weak inflation as well as political uncertainty in some countries will dampen the benefits of cheaper crude prices. Moody’s expects the region’s gross domestic product (GDP) to increase by less than 1% in 2015 and by a little over 1% in 2016.

According to Moody’s, the crude oil prices will remain around $55/barrel in 2015 and increase to $65/barrel in 2016.
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