BAKU, Azerbaijan, November 13. In a dramatic turn of events, the global economy is set to grapple with soaring oil prices, averaging $120 per barrel in 2024 and maintaining a high of $100 per barrel in 2025 due to unprecedented supply restrictions, Trend reports with reference to Fitch Ratings.
A comparison to historical shocks reveals that current prices surpass the $120 per barrel mark witnessed during the tumultuous period of 1979-1980.
The trajectory of oil prices in 2023 tells a tale of its own, with averages at USD82 per barrel until an abrupt shift occurred on October 7th following an assault on Israel by Hamas. This event triggered a spike in prices to $94 per barrel, eventually easing to USD87 per barrel by early November.
The repercussions of elevated oil prices are anticipated to dampen GDP growth across the majority of the 'Fitch 20' economies, with the impact persisting into 2025. The absence of a significant growth rebound in 2025 suggests a more prolonged, albeit moderate, influence on GDP levels globally, potentially influencing assessments of potential growth.
Furthermore, the surge in oil prices is poised to lead to higher-than-expected inflation rates in 2024, with subsequent corrections anticipated in 2025. Türkiye emerges as the nation witnessing the highest percentage point rise in forecasted inflation, closely trailed by India and Poland, albeit with comparatively larger relative increases. Among developed economies, the United States is expected to experience inflation rates approximately 2 percentage points higher than forecasted by the end of 2024, while Canada faces a moderate increase (0.4 percentage points) from the baseline. Other advanced economies, on average, are projected to see inflation rates higher by 1.4 percentage points.
While the inflationary impact is expected to be short-lived, Brazil and Mexico stand out as outliers, projecting higher inflation rates in 2025. As the global economy navigates these tumultuous times, the interconnected nature of oil prices, GDP growth, and inflation rates underscores the complexity of the challenges ahead.
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