Economists are still hotly debating whether the oil crash has been a net positive for advanced economies.
Optimists
argue that cheap oil is a good thing for consumers and
commodity-sensitive businesses, while pessimists point to the hit to
energy-related investment and possible spillover into the financial
system.
A new note from
Francisco Blanch at Bank of America Merrill Lynch, however, puts the oil
move into a much bigger perspective, arguing that a sustained price
plunge "will push back $3 trillion a year from oil producers to global
consumers, setting the stage for one of the largest transfers of wealth
in human history."
Blanch and his team already see evidence that the fall in the price of
crude is having a positive impact on demand, and say that it could
accelerate even further if prices don't pick up.
Says Blanch: "Alternatively in a
lower oil price scenario, e.g. if prices were to average just $40 over
the next five years which is close to the current forward curve, demand
would grow by 1.5 million barrels per day, which is 0.3 above our base
case. Finally, at $20 oil demand would grow by an explosive by 1.7 per
year on average, 0.5 above the base case, on our estimates."
Meanwhile,
in emerging markets, where much of the story of late has been about
disappointing economic growth, Blanch still sees huge upside potential
in terms of automobile penetration and consumption.
Take China for example, where the
strategist sees the oil plunge helping to fuel a boom in SUV sales:
"Moreover, the low oil price is encouraging Chinese consumers to buy
increasingly larger cars. Sales of SUVs, the heaviest passenger vehicles
category, are up 60 percent year-on-year in the last three months,
while overall passenger vehicle sales are growing robustly at
22 percent."
And it's not just emerging markets where the impact of cheaper gasoline is being seen.
After years of stagnation, vehicle miles traveled in the U.S. clearly ticked higher in 2015.
Combine
these trends with the decline in, say, Saudi Arabia's foreign exchange
reserves, or the stock price of any oil company, and you can see the
dramatic wealth shifts now taking place in the world.
By: Joe Weisenthal.