In a new letter to clients, analysts from Bank of America Merrill Lynch have reduced their forecasts for global economic growth. They are now warning that if oil prices keep climbing it could lead to another recession. Anyone feel like we’ve recovered from the last recession?
The price of Brent crude, an industry benchmark, hit $116 a barrel on Wednesday after clashes intensified in Libya. Oil production in the country, Africa’s largest oil exporter, has been greatly diminished, choking off 1 percent of the global oil supply.
The Bank of America Merrill Lynch economists warned that if prices hit $150 a barrel, and stayed there, there would be a serious risk of global recession. If prices hit $200, a recession would be almost certain.
Right now, rising oil prices were a symptom of anxiety, said Thorbjørn Bak Jensen, oil market analyst at Global Risk Management. "We have seen these increases before. If it lasts for just three months, everything should return to normal," said Jensen. But, he said, "as a rule of thumb, every 10 percent increase in oil prices means a 0.5 percent decrease in global growth."
