Don’t expect the recent rise in oil prices caused by concerns over Syria to dampen global growth. That’s the opinion of Bill Adams, senior international economist for PNC Financial Services Group.
Since Monday, when the Obama Administration announced it was considering a military strike against Syria in response to the Assad regime’s use of chemical weapons, benchmark oil prices have risen several dollars. The U.S. oil benchmark, West Texas Intermediate (WTI), stands at $109.52 today while the global benchmark, Brent crude, is at $115.
But Adams notes that while WTI is “relatively expensive” at $109, Brent crude is “only 5% more expensive today than its average in the second half of 2012.” Adams says central bankers in emerging countries such as Brazil and India are likely more concerned about their depreciating currencies than about the price of oil.
“The currencies of most large U.S. trading partners, by contrast (i.e., the pound, euro, peso and yuan) have not dramatically depreciated in 2013, limiting the potential for an oil price shock dampening demand for U.S. exports,” says Adams. “The peso has only weakened 2.4% against the U.S. dollar in the year to date and the yuan is 2% stronger today than Dec. 31, 2012.”