RBA governor Glenn Stevens has said the collapse in the price of oil to near $US60 a barrel is a “bullish point for global growth”, despite the shockwaves it has sent through the energy sector.
This story was first published on December 12, 2014.
Reserve Bank of Australia governor
Mr Stevens’s comments, published in an interview with The Australian Financial Review, came as the steep fall in oil prices over the past month triggered the collapse of Australian oil and gas player Red Fork Energy, which fell into receivership on Thursday.
“People are making quite a lot of the fall in oil prices, which is obviously bad news if you are a producer," Mr Stevens said. “But actually, historically, low oil prices have been good for the global economy. In my opinion, on the whole, this is good news, not bad news.
“It goes to $100 plus, and actually the world economy coped with that, and now it has gone down to, say, $60. I actually think that’s a bullish point for global growth."
US crude futures fell below $US60 a barrel overnight for the first time in five years. Brent and US crude are down nearly 50 per cent from June, when both were trading comfortably above $US100.
Mr Stevens, who also suggested he would like to see the Australian dollar trading at US75¢, acknowledged that the tumbling price of oil meant a period of “adjustment" for energy producers, but he reiterated that cheaper energy can fuel global growth and buoy the US economy.
“Most observers of the US economy that I know think that the advent of cheaper energy is actually quite a bullish factor for the US economy and historically that has certainly been true," he said.
“So, I think there are some quite important positives in there that we should not neglect in our focusing on some of the things that are still clearly a challenge."
Australian energy producers are feeling the squeeze from the lower oil price and on Thursday the oil price collapse claimed its first Australian victim, with shale oil developer Red Fork forced into receivership.
Ellerston Capital, a fund manager 25 per cent owned by billionaire
Also on Thursday, Santos slashed $700 million from its 2015 capital investment budget, including $100 million in exploration spending, as it responded to sharply lower oil prices.
Santos is also considering asset sales.
The Australian Financial Review
