Are low oil prices hitting global growth? At first glance such a
statement seems nonsensical.
A fall in the oil price transfers money from oil-producing
nations to oil-consuming nations. Countries which are net oil
importers account for about 90% of global GDP and consumers in
these countries tend to spend the windfall from cheap fuel prices.
Cheap oil should boost world growth, even if it is bad news for the
major oil exporting nations. History shows that the reverse holds
too. The big spikes in the oil price, in 1974, 1979, 1990 and 2007,
preceded major slowdowns in the world economy.
So with the price of a barrel of Brent crude below $30, its
lowest level in 12 years and down from a peak of $145, why
isn't the global economy in better shape?
