Since last June, world oil prices are dropping a dramatically.
Through this article, we intend to shed light on this situation.
• China's slowdown
In late August, China recorded an industrial production up by 6.9% year on year (against 9% in July) its smallest increase in annual terms since the beginning of the financial crisis in 2008.
Other factors such as retail sales, electricity consumption or investment in fixed capital (infrastructure) confirm the slowdown in the Chinese economy. Chinese growth is 7.5% today.
• The weak trend in global demand
One of the major reasons for the decline in global oil prices is the abundance of the latter in the markets while its main consumers (China, Europe, Japan and Brazil) record, poor economic performance.
Saudi Arabia refuses to lower its oil production against other members of the OPEC countries that keep their levels of intact productions.
What to say, strong oil production (unconventional) from the US? All these factors put together, mean that the gap between global production capacity and global oil demand is considerable (6,000,000 bpd) .And it will not diminishing what pulls, world prices to the down.
• Consequences
According to the IMF, the prolonged decline in the price of oil could contribute up to 0.3 to 0.8 point to global growth in 2015 and 2016.
Regarding the case of the United States, some experts believe that oil prices at $ 40 implies a gain of 1.350 billion for all buyers (states, companies, households) .A down 1 dollar to pump gallon of gasoline would increase the disposable income of 100 million households in the United States of $ 1 billion. Which would lead to an additional expense of $ 1,000 for each home spared on its fuel expense.
For a country such as France or the tax pump prices rise around 50%, the impact would be less. But it should serve as support as well as the decline of the Euro, to support an economy whose growth is expected to easily exceed 1% in 2015.
Some might be tempted to ask why she has the value of shares tend to fall when oil falls on commodity markets.This is simply due to the fact that energy companies account for a significant share of the global dimension..ExxonMobil ($ 388 billion) PetroChine, Royal Dutch Shell, Chevron are all ranked in the top 25 largest stocks.
Other units in the US, oil and oil services sectors weigh heavily in investing. Spending on this area in 2014 accounted for 1% of GDP (about $ 180 billion) double the 2010.Or falling prices undermines new entrants gas and oil shale. Developed, to raise concerns about the growth dynamics lead by those in the United States in recent years.
In the same vein, the oil price collapse is not yet felt in the company accounts. On the contrary, he even earned 2.5 points of growth in the profits of US companies in the fourth quarter 2014.Moreover, an IMF study on the impact of lower prices of black gold on world growth, shows that the -C could be twice as important because of the violence of the phenomenon.
But the main explanation lies in the fact that deflation could be a real foil for investors.
Regarding the euro area, the ECB will anticipate negative inflation in the first quarter. While the decline in oil prices could fuel the idea that prices will continue to decline and thus encouraging consumers to spare the Euros saved by filling rather than spending them in a new car. In summary, for markets to see the oil drop like a real good news would have it first stops declining.
-Frédéric Betta-Akwa
Through this article, we intend to shed light on this situation.
• China's slowdown
In late August, China recorded an industrial production up by 6.9% year on year (against 9% in July) its smallest increase in annual terms since the beginning of the financial crisis in 2008.
Other factors such as retail sales, electricity consumption or investment in fixed capital (infrastructure) confirm the slowdown in the Chinese economy. Chinese growth is 7.5% today.
• The weak trend in global demand
One of the major reasons for the decline in global oil prices is the abundance of the latter in the markets while its main consumers (China, Europe, Japan and Brazil) record, poor economic performance.
Saudi Arabia refuses to lower its oil production against other members of the OPEC countries that keep their levels of intact productions.
What to say, strong oil production (unconventional) from the US? All these factors put together, mean that the gap between global production capacity and global oil demand is considerable (6,000,000 bpd) .And it will not diminishing what pulls, world prices to the down.
• Consequences
According to the IMF, the prolonged decline in the price of oil could contribute up to 0.3 to 0.8 point to global growth in 2015 and 2016.
Regarding the case of the United States, some experts believe that oil prices at $ 40 implies a gain of 1.350 billion for all buyers (states, companies, households) .A down 1 dollar to pump gallon of gasoline would increase the disposable income of 100 million households in the United States of $ 1 billion. Which would lead to an additional expense of $ 1,000 for each home spared on its fuel expense.
For a country such as France or the tax pump prices rise around 50%, the impact would be less. But it should serve as support as well as the decline of the Euro, to support an economy whose growth is expected to easily exceed 1% in 2015.
Some might be tempted to ask why she has the value of shares tend to fall when oil falls on commodity markets.This is simply due to the fact that energy companies account for a significant share of the global dimension..ExxonMobil ($ 388 billion) PetroChine, Royal Dutch Shell, Chevron are all ranked in the top 25 largest stocks.
Other units in the US, oil and oil services sectors weigh heavily in investing. Spending on this area in 2014 accounted for 1% of GDP (about $ 180 billion) double the 2010.Or falling prices undermines new entrants gas and oil shale. Developed, to raise concerns about the growth dynamics lead by those in the United States in recent years.
In the same vein, the oil price collapse is not yet felt in the company accounts. On the contrary, he even earned 2.5 points of growth in the profits of US companies in the fourth quarter 2014.Moreover, an IMF study on the impact of lower prices of black gold on world growth, shows that the -C could be twice as important because of the violence of the phenomenon.
But the main explanation lies in the fact that deflation could be a real foil for investors.
Regarding the euro area, the ECB will anticipate negative inflation in the first quarter. While the decline in oil prices could fuel the idea that prices will continue to decline and thus encouraging consumers to spare the Euros saved by filling rather than spending them in a new car. In summary, for markets to see the oil drop like a real good news would have it first stops declining.
-Frédéric Betta-Akwa
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