[ 2014-12-10 ]

Petrol to drop to £1 a litre, says Goldman Sachs
Goldman Sachs says falling oil prices will give
hard-pressed households a much-needed boost

London (UK) - 10 Dec 2014 – The Telegraph - The
price of a litre of petrol will drop to almost £1
in the coming months if oil prices remain low,
putting more money in people's pockets and
encouraging consumers to spend.

Kevin Daly, senior economist at Goldman Sachs,
said the falling oil price would boost consumer
confidence even as wage growth remains weak and
uncertainty clouds the global growth outlook.

Mr Daly estimated the price of a litre of unleaded
petrol could fall to £1.05 in the coming months,
from the current UK average of around £1.20,
according to Petrolprices.com.

Brent crude edged down to $66.50 a barrel on
Tuesday, and has fallen more than 40pc from its
June high of $115.

Last month, Professor Stephen Glaister, head of
the RAC Foundation, said he believed prices would
fall to £1 if the slump in the market continued.

While MPs including Prime Minister David Cameron
have warned that risks to the global economy could
harm UK growth, Mr Daly argued that UK consumers
were less concerned about the global growth
outlook than their own budgets. "My own view is
that people respond more to the pounds and pence
in their pockets than warnings by politicians of
dangers lurking abroad," he told the Treasury
Select Committee on Tuesday.

"The men and women of Britain will really notice
things such as the sharp decline in oil prices.
"If [prices] remain at these levels we’re likely
to see a litre of unleaded petrol fall to between
£1.05 and £1.10 per litre. That is a significant
decline and I suspect … they will notice that
more than they will the concerns over global
growth."

Mr Daly also said fears about the impact of a
eurozone decline on UK growth were overblown. "I
think there’s a distinction to be drawn between
the negative impact that will come from sluggish
growth, which we clearly have in the eurozone, and
the negative impact that comes from a full blown
crisis, as we had in 2010, 2011 and 2012.

"The sovereign crisis had the effect of
significantly raising the funding costs of UK
banks, and I think that was significantly negative
for the UK. But my view is that the UK could cope
with a continued period of sluggish growth."

Morgan Stanley said on Monday that it now expects
Brent to average $70 per barrel in 2015, well
below its earlier forecast of $98, while RBS said
"a perfect storm of falling demand and rising
supply" could push Brent crude down to $42 a
barrel.

Source - The Telegraph

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