Countries to benefit from oil price slump: World Bank

Countries to benefit from oil price slump: World Bank

Gains from low oil prices could be substantial for developing-country importers if supported by stronger global growth, a World Bank (WB) Group analysis said.

The analysis in the latest edition of Global Economic Prospects explained that the decline in oil prices reflected a confluence of factors, including several years of unexpected increases in the oil supply, surprising declines in demand, receding geopolitical risks in some areas of the world, a significant change in the policies of the Organisation of the Petroleum Exporting Countries (OPEC) and the appreciation of the US dollar.

The report also stated that although the relative strength of the forces driving the recent plunge in prices remained uncertain, supply-related factors appeared to have played a dominant role.

"Soft oil prices are expected to persist in 2015 and will be accompanied by significant real income shifts from oil-exporting to oil-importing countries. For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external and fiscal pressures," the WB Group analysis said.

However, the report continued, weak oil prices presented significant challenges for major oil-exporting countries, which would be adversely impacted by weakening growth prospects along with fiscal and external positions. If lower oil prices persisted, there could be a decline of investments into oil exploration and development. This would put investments in some low-income countries at risk; perhaps also investments in unconventional sources, such as shale oil, tar sands and deep sea oil fields would decline.

"For policymakers in oil-importing developing countries, the fall in oil prices provides a window of opportunity to undertake fiscal policy and structural reforms, as well as to fund social programs," WB director of development prospects, Ayhan Kose, said in a release made available to The Jakarta Post on Thursday.


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