Tags: Colas | oil | recession | price

ConvergEx Survey: Oil Price Plunge Risks Global Recession

By    |   Friday, 23 January 2015 10:41 AM

Many economists say plunge in oil prices during the past seven months will prove to be a boon for the global economy.

But a survey of 306 investment professionals by the ConvergEx Group brokerage paints a different picture. A total of 68 percent of the respondents think oil prices will keep falling, while only 20 percent responded that they felt oil prices had made their lows.

And an identical percentage believes that if oil slides to below $30 a barrel, a global recession is inevitable.

"The idea behind this question was simple: at some point oil prices aren't just a nice theoretical tailwind for global economies," Nicholas Colas, chief market strategist at ConvergEx, wrote in a commentary.

"Rather, they become a signal that worldwide demand is contracting so quickly that oil prices must quickly decline to reflect that fact."

To be sure, 66 percent of respondents think that oil prices at current levels are positive for the U.S. economy, while only 22 percent think they're negative.

In addition, 85 percent sees crude prices between $40 and $80 a barrel by year-end.

"Bottom line: market participants see the proverbial barrel as half full right now, happy with the potential boost to economic growth from lower energy prices. They also expect prices to stabilize by the end of the year, or move higher. Before that, however, watch out. The volatility in oil markets isn't over yet."

World Bank President Jim Yong Kim begs to differ with the forecast of global recession. "Our projection is around 3 percent [for world growth this year], so you could see a 15 to 20 percent increase in growth if those oil prices stay low," he told CNBC.

That's because historical data indicate a 30 percent decline in oil prices would boost global GDP by half a percentage point, Kim said.

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Many economists say plunge in oil prices during the past seven months will prove to be a boon for the global economy.
Colas, oil, recession, price
305
2015-41-23
Friday, 23 January 2015 10:41 AM
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