The recent bout of higher oil prices is unlikely to make much of a dent in the global recovery, according to economists who say strong growth and flush consumers in advanced economies will help the world absorb much of the blow from costlier crude.
Rising global demand and a dispute about supply levels among OPEC members and allies sent U.S. crude oil futures prices rising above $75 a barrel earlier this month, the highest level in six years, according to The Wall Street Journal. U.S. prices have retreated since but remained above $70 a barrel Thursday, about where they were in the fall of 2018.
“In the scheme of things this is pretty small,” says Gus Faucher, chief economist at the PNC Financial Services Group.
An important to watch the cost of oil as a proportion of gross domestic product, known as the oil burden. That indicator is expected to rise to 2.8% of global GDP for 2021, assuming an expected average oil price of $75 a barrel this year, according to Morgan Stanley. That expected 2021 oil burden of 2.8% remains below the long-term average of 3.2%. Read the full story.