Portugal will “easily accommodate” oil price rises – economists

By TPN/Lusa, in News · 01-02-2018 14:16:00 · 0 Comments

Oil price growth may have a negative impact on the Portuguese economy, but economists say the expected rise in 2018 is not worrying and will be “easily accommodated.”

After the price of a barrel of Brent oil, for delivery in March, exceeded US$70 in January for the first time since December 2014, Lusa News Agency contacted analysts to understand the impact this rise may have on the Portuguese economy.
“From our point of view, these are still not worrying rises, just think about what happened in recent years, when we had oil above US$100, obviously at the time it had some impacts, but at this moment the world economy is much larger than it was then, which means that it is an acceptable value,” Rui Bernardes Serra, chief economist at Montepio, told Lusa.
The economist, who, like other analysts contacted by Lusa, believes that the price per barrel will not exceed US$70 this year, adding that it may even decline slightly in 2018, says that if there were a jump to US$100, “there would be an impact” for Portuguese families.
In the 2018 State Budget report, the Ministry of Finance stipulates an average oil price of US$54 per barrel in 2018 and adds that a 20 percent increase (to around US$65) would reduce Gross Domestic Product (GDP) growth by 0.1 percentage points (about €180 million).
Serra points out that part of the rise in the price of oil is related to growth of the world economy and that “this will weigh positively on the Portuguese economy, and may easily offset the negative impact of oil on Portuguese GDP via private consumption.”

Professor António da Ascensão Costa of the Higher Institute of Economics and Management (ISEG) said that the increase in the price of oil “ends up being transmitted to the whole economy and in general the impact is slightly negative,” if the rise remains at around 20 percent.
Both economists believe a rise to around US$100 per barrel would be a concern.
In 2017, world demand for oil increased 1.64 percent (equivalent to 1.57 million barrels per day) to a total of 96.99 million barrels per day, according to the Organisation of Petroleum Exporting Countries (OPEC).
As for oil prices, which rose due to the reduced production pact between OPEC and ten other non-OPEC countries led by Russia, OPEC analysts point out that the December average price was the highest since June 2015.
The benchmark price of OPEC’s barrel was US$62.06 in December, 29 percent more than in the previous year and an annual average of US$52.42 in 2017.


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