Tags: Morgan Stanley Pricey Oil Not Lethal to Economy This Time

Morgan Stanley: Pricey Oil Not Lethal to Economy This Time

Thursday, 03 Mar 2011 09:06 AM

High oil prices won't damage the global economy like they did in decades past, according to Morgan Stanley.

Oil's "intensity" on global economic output today is much less than it was in the past, especially in the 1970s and early 1980s, the financial institution says in a report.

Furthermore, oil exporters will spend more of their petrodollars to appease their restless population this time around.

That increase spending will boost imports from other countries and transfer the wealth abroad in the process.

"With the risk of social unrest increasing, governments will be inclined to increase spending and transfers in order to maintain stability," the banks says.

"This suggests that a larger part of the initial wealth transfer from net exporters to net importers will be reversed, over time, through goods imports of the former from the latter."

Unrest has rocked oil-producing countries like Libya recently, and some fear it may spread to other exporters.

Oil prices are leveling off from their recent rally, although they are still hovering firmly above $100 a barrel.

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Gasoline prices in Carson, Calif.
"Even though some oil has been loading from Libyan oil terminals in the last few days, concerns remain that output could be totally shut," says Tom Pawlicki, an analyst at derivatives broker MF Global, according to CNN.

"So far, Saudi Arabia has made up for the shortfall by exercising its spare capacity. However, a 'day of rage' is planned for March 11, and until that day comes to pass, it's likely that oil prices will remain buoyed."

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High oil prices won't damage the global economy like they did in decades past, according to Morgan Stanley. Oil's intensity on global economic output today is much less than it was in the past, especially in the 1970s and early 1980s, the financial institution says in a...
Morgan Stanley Pricey Oil Not Lethal to Economy This Time
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2011-06-03
Thursday, 03 Mar 2011 09:06 AM
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