Risk of upward pressure on oil prices: In 2014, we expect the pick-up in growth in the US and the Eurozone to lead to higher demand for oil. The effect of this, coupled with persistent disruptions to oil supply, either due to geopolitical reasons or logistical issues (e.g. lack of extracting or delivery capacity) could herald higher oil prices.
We used the National Institute Global Econometric Model (NiGEM) to estimate the likely scale of a $20 per barrel increase in oil prices across the global economy and for selected major national economies covered by the model. Figure 2 shows that Japan, the US and the Eurozone are the three major economies that are expected to experience a slowdown in growth if this scenario materialises. India, however, is projected to fare the worst out of the BRICs, while Russia is estimated expected to record strong GDP growth because of the importance of energy-related exports.
Figure 2: Change in the 2014 national GDP growth rates in a scenario where oil price increases by $20 per barrel
Source: PwC analysis using NiGEM