Oil and Greece

2015 has arrived with a fair share of concerns, new and familiar. Falling oil prices could be good for Western consumers but detrimental for the UK and US economies and their production sectors. And the UK spring election could be the precursor to a difficult debate about the UK’s future in the European Union.

One main arena in which uncertainty has built up in recent months is the oil markets, with the price of benchmark Brent crude sliding 11.2% and below $50 for the first time since the global recession in 2009. The slump in oil prices has curbed investor confidence since the start of the year, with a fall in equity markets and a rise in demand for safe-haven assets. In part, this reflects investor concerns about the impact of lower oil prices on companies related to energy production and oil-dependent economies. However, cheaper oil should boost demand and help the world economy continue to grow at a steady pace. Lower oil prices open the way for a fall in consumer prices and place a further pressure on already-low levels of inflation.

Global stocks ended the first full trading week of 2015 in retreat, as the continued descent of oil mixed with concerns over economic data and the next step by central bankers on both sides of the Atlantic. The MSCI World index for developed markets lost 1.2% over the week. The recent fall in oil prices has sent global energy stocks tumbling and fuelled a sell-off amid fears that the cheaper oil could spell an economic slowdown rather than growth. It has been estimated that the US exploration and production sector will cut spending by up to 40% over the year, with operators outside the US set to reduce outlay by 20%.

Photograph: George Steinmetz/Corbis