Increases in the price of oil have a greater impact on the global economy than falls in the price of oil. The main impact is felt through an immediate increase in general inflation. Transport actions, net fuel imports, public debt/GDP and commercial integration are key factors to take into account. Jordan, South Africa and Thailand are vulnerable; The EAU, Switzerland and Peru are less, point the economists of Standard Chartered, Madhur Jha and Ethan Lester.
Impact sense mainly through general inflation
“The increasing tensions between Israel and Iran have recently led to the Brent oil prices revert 10% in oil prices reduces global GDP growth by 0.1-0.2 percentage points, while a drop in oil prices only increases growth in half of that.
“Historically, the shocks in the price of oil are reflected in the inflation of the general CPI within a quarter. The World Bank estimates suggest that a 10% increase in oil prices raises inflation of the general CPI in 0.4 percentage points in a medium economy. However, the impact on underlying inflation is much lower, reflecting the credibility of the Central Bank.”
“We list several indicators that determine what economies are prone to see greater inflationary pressures due to a shock in the price of oil. These include net imports of fuel, commercial integration, fiscal space, the participation of transport in the baskets of the CPI and energy subsidies. In oil, while Thailand and Hungary are vulnerable due to their commercial opening but use subsidies to manage the impact.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
