>When will the oil price become a problem? Scenario analysis (DANSKE)

Will oil prices derail the global recovery (again)?

■ Oil prices are again on the rise creating a new risk to the global economy. This takes thoughts back to early 2011 when the global recovery was confronted with a sharp rise in oil prices followed by a downturn in the global economy.


■ In this document we look at how much it would take to derail the reocovery. We outline three scenarios for the oil price and estimate how much they affect the global economy.


■ So far, the rise in the oil price has been moderate and we expect the effects to be limited, although it will dent the US recovery somewhat in the short term.


■ Our estimates suggest the oil price has to go above USD140/bl to have a material impact. This would create a soft patch in the US, with growth below 2% and prolong the period of weak growth in the euro area. We expect China to be least affected.


■ Should oil prices rise to USD170/bl, we project the US would experience a sharp slowdown, with growth below 1% for the rest of the year. The recession in the euro area would also be prolonged. Chinese growth would also be hit but would remain at decent levels.


■ Oil price shocks tend to hit the US the most relative to Europe and Asia


To read full report: GLOBAL RECOVERY
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