Economic growth may struggle despite energy price drops

There can be no doubt that the plunge in global oil prices – which have dropped by nearly 60% over the past six months – will cause an enormous transfer of wealth. However, the effect the price slump will have on the global economy is less clear. 

Lower oil prices should provide a multi-billion dollar boost to energy-consuming countries, stimulating economic growth, increasing demand for the fuel and bolstering gas demand for consumers with oil-indexed contracts. However, hydrocarbon producers will see their oil receipts reduced by around $2 trillion because prices have fallen off a cliff: oil stood at more than $115 per barrel in June 2014, but is now languishing at less than $50/bbl.