A January 29th report from Barclays PLC (NYSE:BCS) (LON:BARC) Equity Research suggests that investors are focusing too much on the bleeding in the energy sector from the huge drop in crude prices, and not enough on the major benefits to consumers (and consumers good producers) that can be expected from an additional $1.6 trillion in income in 2015 due to lower oil prices
Barclays analysts Ian Scott and colleagues argue that investors are too negative, and that the consumer discretionary sector currently represents a good buying opportunity. They note: “This [investor focus on the energy sector] suggests a “glass half empty” approach reflecting the negative side of a possible $1.6 trillion transfer of income from oil producers to oil consumers, but not yet the potential benefits.”
Crude oil plunge could result in $1.6 trillion wealth transfer in 2015
The Barclays report notes that if crude prices stayed at around $50 a barrel throughout 2015, this would imply a reduction of expenditures on oil from around 4% to 2% of global GDP. When you do the math, that ends up as a transfer of $1.6 trillion from “oil producers” to “oil consumers”.
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