The declining price of crude oil may no longer grease the wheels of the world economy as much as it once did — and as much as International Monetary Fund Managing Director Christine Lagarde expects.
Recent history even may be on the side of contrarians like Fatih Yilmaz from London-based hedge fund SLJ Macro Partners LLP. On top of that, advances in energy efficiency and interest rates already at zero are likely to weaken the potential ripple effects of the 37 percent plunge in Brent crude this year.
“It is hard to make a strong statistical statement about the impact of declining oil prices on the global gross domestic product,” said Yilmaz in a Dec. 4 report.
Between 1970 and 2000, a 20 percent decline in oil typically added 0.25 point to worldwide GDP in the subsequent 20 months, his analysis showed. Since 2000, however, that relationship has broken down with the initial impact of an oil drop on GDP actually negative. It turns positive after a year and then fades
Read the original article on the ‘Bloomberg’ website.