Audio By Carbonatix
Ratings agency, Fitch, has revised its forecast for Brent crude to US$87 per barrel, from US$70.
According to the UK-based firm, the oil shock is a strong headwind to world growth, but its base case is far less severe than the pernicious oil shocks of the 1970s.
Real oil prices reached US$170 per barrel in 1979 (measured in current prices) and OPEC played a very different role then.
Oil consumption as a share of world Gross Domestic Product (GDP) has halved since 1980.
Nevertheless, with geopolitical uncertainties remaining high, Fitch also examined an adverse scenario where oil prices average US$100 per barrel in 2026. Equity prices also fell by 10% and credit conditions tightened.
Growth in the US could fall to just 0.8% over the next 12 months in this scenario, to 0.3% in the eurozone and 3.4% in China.
Presently, Brent Crude is going for $US94.68 per barrel.
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