Tags: oil | prices | stock | China

OPEC Actions Boost Global Economy

By    |   Wednesday, 10 Dec 2014 08:29 AM

Low oil prices should boost economic growth in China, helping that country achieve GDP growth of 7 to 7.5 percent.

Analysts with Bank of America Merrill Lynch noted that a 10 percent drop in oil prices could increase GDP growth by 0.15 percent in China. Oil prices have fallen to less than $70 a barrel from more than $100 a barrel in June, a 30 percent decline.

If the price of oil stays near the current level, China could see its economy grow 0.45 percent more than it would have with $100 oil. India and a number of other countries around the world would also benefit from lower oil prices, as would consumers around the world.

Many analysts are focused on the risks of lower oil prices, which include the risk of instability in oil-producing countries like Iran and Russia. The upside — lower prices for consumers and increased growth in some of the world's fastest-growing economies — is largely being ignored.

Global growth is bullish for stock market investors and low oil prices could drive additional gains in the stock market. Lower oil prices would also reduce inflationary pressures and allow central banks to maintain low interest rates.

In the long term, OPEC is hoping that low prices drive out competition from low-cost shale producers in the U.S. These producers have used technology to reach this level of production and new technologies could help sustain the business in a low-price environment.

We truly don't know how the price war will play out. We do know that in the short term, low prices will help China avoid a slowdown and should boost other economies around the world.

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MichaelCarr
Low oil prices should boost economic growth in China, helping that country achieve GDP growth of 7 to 7.5 percent.
oil, prices, stock, China
275
2014-29-10
Wednesday, 10 Dec 2014 08:29 AM
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