Oliver's Insights - Rising oil prices - what is the tipping point for growth?
28 March 2011 - This note looks at the impact of rising oil prices on the outlook for economic growth and implications for share markets.
The key points are:
- Global oil prices remain under upward pressure from turmoil in the Middle East and North Africa. This will dampen global growth and add to the financial pressure on Australian households.
- The real problem for Australia is that the rise in oil and petrol prices will add to consumer caution. While higher energy prices will boost national income, and hence resource sector investment, the rise in petrol prices over the last month has already added another $5 to the weekly petrol bill for a typical Australian family. It is now just $10 a week below the 2008 high.
- The global and Australian economies and share markets can probably live with current oil price levels. However, a sustained sharp rise in the oil price to US$140 would make life a lot more difficult.
