No matter how hard residents of Hungary, the Czech Republic and Turkey work, they won’t strike oil. Nor will those in the Philippines, India and Thailand. They’ll be the biggest losers if this month’s spike in crude prices is extended, say UBS AG economists Larry Hatheway and Andrew Cates.
Oil is again providing an obstacle to worldwide economic expansion after geopolitical flashpoints from Ukraine to Iraq drove a barrel of Brent crude beyond $115 last week for the first time since September. While it has since slid toward $113, it’s still up from almost $108 at the start of the year.
On the flip side are the winners. A $10 increase in the price of a barrel transfers 0.5 percent of gross domestic product to oil exporters from importers. The UBS economists calculate the overall effect is for a reduction in global growth of 0.3 point.
The losers would see output shaved by as much as 0.7 point of GDP in a year if oil climbs another $10, according to UBS’s June 23 report. Russia is the biggest beneficiary, with a potential GDP boost of 0.6 point. The report didn’t venture a prediction for Iraq or other oil producers such as Saudia Arabia.
Among the major economies, the U.S. is now insulated by its fracking revolution, meaning it stands to lose just 0.1 point from the further increase rather than the 0.3 point historically. The euro area is still pinched by that amount.
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