Falling oil prices to boost growth: AMP Capital

Falling oil prices to boost growth: AMP Capital

Any significant dip in share markets as a result of falling oil prices should be viewed as a buying opportunity, says AMP chief economist Shane Oliver.


Share markets have reacted negatively to the fall in oil prices due to the visible impact on energy producers, said Mr Oliver.

Oil-dependent economies like Russia have also suffered badly as the world oil price has fallen by 50 per cent compared with a year ago, he said.

Mr Oliver predicted further weakness in the oil price to around $40 per barrel.

However, the plunge in oil prices is likely to be a “huge positive” for the global economy generally, he said.

The lower price of fuel contributes to lower business costs and provides a boost to household spending power, Mr Oliver said.

“It’s likely that over time the positive impact on global growth and hence profits from lower oil prices will dominate and this will help drive share markets higher by year end.

“After oil prices plunges in 1986, 1998 and 2008, US shares gained an average 23 per cent over the subsequent 12 months.

“The risk of a major threat to the global economy or share markets from energy producers is low,” he said.

But Mr Oliver did not rule out a “big blow up” in the short term, such as further problems in Russia or a default by a more marginal energy company.

 

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