Oil - Boon or slippery slope

Roughly one year ago, the consensus forecast for the end of 2014 was $100 per barrel for West Texas Intermediate and $110 for Brent crude — a miss of about 30% compared with current prices around $70.

“In a year full of macro surprises, the sharp decline in the price of crude oil is the latest development to make headlines.” - By Robert Spector, Sanjay Natarajan and Robert M. Hall, MFS

Below summary by Anthony O'Brien

Roughly one year ago, the consensus forecast for the end of 2014 was $100 per barrel for West Texas Intermediate and $110 for Brent crude — a miss of about 30% compared with current prices around $70.

To be sure, there are bound to be pockets of the global economy that will benefit from lower energy costs. When all the positives and negatives are balanced out, we can likely expect a net boost to global growth relative to what we would have seen with $100 oil. Then again, it was weak global growth — alongside oversupply — that was a key contributor to falling crude prices in the first place, so the argument becomes kind of circular.

Prefer to think of the oil price drop as stimulative overall, similar to a tax cut. Declines in the price of any commodity help distribute growth away from regions that are producers toward those that are consumers.

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