Oil affects countries around the world differently. Generally speaking, low prices are great for net importers of oil, but bad for net exporters.
UBS’s macro strategy team considered what a permanent $US10 drop in a barrel of Brent crude would mean.
Estimations revealed Australia’s Gross Domestic Product (GDP) would not change one year after a permanent $US10 decline in oil prices.
“Oil-producing economies such as Russia and Norway and OPEC clearly lose out when oil prices fall, with the former seeing an impairment of its GDP of over 1 percentage point,” UBS analysts wrote on Thursday.
“Among large developed economies, the US and Japan are least affected. Although Japan has a relatively high dependency on imported oil the weight of energy products in its consumer price basket is quite low compared with other developed economies. That means the real income-related benefits for Japan’s consumers from weaker oil prices are relatively low compared with elsewhere.”
For the US, the energy dependency and sensitivity story has been evolving rapidly as more and more oil has been fracked out of America’s shale basins.
“Prior to the shale revolution model simulations would have suggested a boost of 0.2 to 0.3 percentage points to US growth for every USD 10/bbl decrease in the price of oil,” they write. “That estimate is now only 0.1%.”
Overall, they estimate that a sustained $US10 drop in prices will add around 0.2 percentage points to global GDP.