What if oil prices rose rapidly? – Natixis

Patrick Artus, Research Analyst at Natixis, suggests that they make the working assumption (not a forecast) that rapid growth in global demand for oil leads oil prices to rise faster than is currently expected.

Key Quotes

“What consequences - also unexpected - would ensue from a rapid rise in oil prices, which may have begun at the end of 2017?

• Obviously, a transfer of growth from oil-importing countries to oil exporting countries;
• An increase in inflation in OECD countries, adding to the abovementioned loss of growth, due in particular to nominal wage stickiness and pressure on central banks to normalise their monetary policies faster;
• A downward correction in equity markets and upward corrections in expected inflation and long-term interest rates.”

“If there is an unexpected rise in oil prices, its effects on growth, inflation, monetary policy, consumption, interest rates and share prices should be easy to assess.”