Falling crude prices are a “shot in the arm” for many global economies, an investment trust chief said yesterday.
Andrew Bell, chief executive of the Chelmsford-based Witan Investment Trust was among a string of bosses delivering their views on the oil price plunge on behalf of a group representing UK investment trusts responsible for assets worth about £122billion.
He said: “The fall in the oil price is a shot in the arm for oil consuming economies, despite the so far rather sulky response of equity markets.
“Negative reactions have focused on three themes; the speed of the fall creates a major shock for the oil producers, who will be forced to cut investment rapidly. This is true for that sector but there are more winners than losers in most economies.
“Secondly, that falling world demand is the possible cause, so we should be worrying about recession. In our assessment increasing shale oil production has contributed more to the oversupply, even though demand has grown by less than forecast. So the lower price does not seem to be a forecast of recession as it was in 2008.
“And thirdly, that lower oil prices will push inflation rates lower or into negative territory, increasing worries about deflation. Lower inflation due to falling costs rather than collapsing growth counts as good deflation in our book. Reversing the argument, would higher oil prices accompanied by higher inflation rates really be better?”
Fidelity Asian Values portfolio manager John Lo said lower oil price were generally beneficial, adding: “Consumers and companies the world over get cheaper transport, power, raw materials and heating.
“Countries that import oil have a huge benefit to their terms of trade, and also a fiscal benefit if they are subsidising oil prices to the consumer.”
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