Baku, Azerbaijan, Jan. 14
By Aygun Badalova - Trend:
Oil prices on the global markets continue to fall, swiftly approaching $40. Yet, those who are able to somehow change the situation, remain idle.
Currently, Brent price is being traded at around $46 per barrel, and is close to its six-year low, while WTI price stands at slightly over $45 per barrel.
Oil traders are betting that crude prices will hit a 20-year low of $20 a barrel as Gulf producers stood firm on their plan to turn the screws on shale drillers in the United States, UK's The Times reported in its article.
The roughly 60-percent drop in global oil prices since June of last year should be a net positive for the world economy, boosting oil-importing countries, according to the forecasts of the World Bank.
Nonetheless, the WB lowered its global growth forecast for 2015 and 2016. According to its forecasts, the world GDP growth will reach 3 percent this year and 3.3 percent the next year. The reasons for lowering the forecasts are disappointing economic prospects in the euro zone, Japan and some major emerging economies that offset the benefit of lower oil prices.
William Jackson, Senior Emerging Markets Economist at the British economic research and consulting company Capital Economics believes that the economies of Central and South Eastern Europe should be major beneficiaries from the fall in oil prices, since they are large net oil importers.
"If oil prices stay at their current level, this could knock around $15 billion off the region's import bill - equivalent to over one percent of GDP," Jackson said in a report obtained by Trend.
Nonetheless, concerns have risen that lower oil prices could push the region into deflation, according to the economist.
"The sharp drop in oil prices will push much of Central and South Eastern Europe into deflation over the coming months and we have revised down our inflation forecasts accordingly. However, for most countries, the risk of deflation becoming entrenched is low and, if anything, the fall in oil prices should boost real wages and domestic demand," Jackson said.
In the near-term, as Jackson believes, the main channel through which lower oil prices will affect the region is via the decline in petrol prices.
"On past form, the current price of oil is consistent with petrol prices falling by over -10 percent year-on-year," he said. "The impact will vary from country to country, but at an aggregate level, that falling petrol inflation could knock around 0.6 percent off the region's headline inflation rate."
"It looks almost certain that most countries will fall into deflation - the key question now is whether this is prolonged," the economist said.
In this regard, there are some grounds for concern, he believes.
The impact of the fall in oil prices won't be limited to petrol prices. In time, it is likely to spread to household energy bills and other goods.
At the same time, the global backdrop of low inflation will keep import price pressures subdued, Jackson said.
Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter:@AygunBadalova