Global Financial Crisis and Oil Price

oil prices: But what accounts for the further plunge in oil prices in the last few weeks — to lows last seen in the immediate aftermath of the 2008 global financial crisis — and how will it affect the world economy The standard explanation is weak Chinese demand, with the oil price collapse widely regarded as a portent of recession, either in China or for the entire global economy, according to The Moscow Times. But this is almost certainly wrong, even though it seems to be confirmed by the tight correlation between oil and equity markets, which have fallen to their lowest levels since 2009 not only in China, but also in Europe and most emerging economies. When the oil price halved last year, from $110 to $55 a barrel, the cause was obvious: Saudi Arabia decision to increase its share of the global oil market by expanding production. The predictive significance of oil prices is indeed impressive, but only as a contrary indicator: Falling oil prices have never correctly predicted an economic downturn. Conversely, every global recession in the past 50 years has been preceded by a sharp increase in oil prices. On all recent occasions when the price of oil was halved — 1982-1983, 1985-1986, 1992-1993, 1997-1998, and 2001-2002 — faster global growth followed. (news.financializer.com). As reported in the news.