Larry Kudlow on the radio yesterday was saying 'King dollar' with low energy costs are terrific for our economy & the Market. It gives consumers more money which will add to the GDP.
And he said prices of imports & exports will also benefit.
from page 8:
The cumulative oil price decline between June 2014 and January 2015 was the third largest of the past
30 years (when oil began trading in futures exchanges) and was driven by a “perfect storm” of
conditions that exerted strong downward pressure on prices.
Although changes in supply and demand
expectations played a key role, these revisions were neither unique nor unusually large. However, they
coincided with three other major developments: a significant shift in OPEC’s policy objectives, less-than expected
spillovers from geopolitical risks, and a significant appreciation of the U.S. dollar.
Empirical estimates suggest that supply (much more than demand) factors have accounted for the lion’s share of
the latest plunge in oil prices. Since both supply and demand related factors underlying the recent
decline in oil prices are expected to persist over the near- to medium-term, oil prices are likely to remain
soft but volatile, with a gradual recovery over the next decade.
Sustained low oil prices are likely to have significant implications for growth and inflation. If driven
largely by supply factors, historical estimates suggest that the 45 percent decline in oil prices—as
currently expected for 2015 on an annual average basis—
would likely lift global GDP by up to 0.7-0.8
percent over the medium term and reduce global inflation by a full percentage point in the short term.
However, several factors may change the effects on growth and inflation. Weak global demand and
acute pressures on oil exporters, combined with lingering post-crisis uncertainties and policy challenges
among large importers, could limit some of the expected benefits for the global economy in the shortterm.
Sharp currency adjustments, varying taxes, subsidies or other price regulations could imply
different effects on inflation patterns across countries.
Weak oil prices will also lead to significant real income shifts from exporting to importing countries,
affect fiscal and current account dynamics, and translate into lower prices for non-oil commodities.
These forces may constrain macroeconomic policies in some dimensions while opening up opportunities
to address long-standing reform needs in other areas.
In oil-importing developing economies, the decline in oil prices should support stronger growth, reduce
inflation, and improve external and fiscal balances, which should lower macroeconomic vulnerabilities and, therefore, widen policy room. In contrast, growth in oil-exporting economies will likely be
negatively affected, as lower oil prices cause significant losses in export and fiscal revenues.
A precipitous adjustment in oil-exporting countries could be forced by sudden reassessment of credit and
sovereign risks by investors and made more difficult by limited sectoral diversification.
The sharp decline
in oil prices has already been accompanied by substantial capital outflows, reserve losses, and sharp
depreciations in some oil exporters, with potentially negative cross-border spillover effects.
more:
http://www.worldbank.org/content/dam/Worldbank/Research/PRN01_Mar2015_Oil_Prices.pdf
DO SOMETHING!
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