VIDEO: Chance of double dip for petchems – economist

13 April 2011 14:10  [Source: ICIS news]

By Will Beacham

Chance of double dip for petchems - economistBRUSSELS (ICIS)--The recent spike in oil prices means there is a chance that parts of the global economy and the petrochemical industry could slip into a double-dip recession, an economist said on Wednesday.

Latest forecasts suggesting moderate growth in global GDP were based on a much lower oil price than we are currently experiencing, according to Alan Eastwood, economic adviser to UK trade group the Chemical Industries Association.

Speaking in a personal capacity on the sidelines of the ICIS purchasing conference in Brussels, Eastwood told ICIS: “I quoted authorities such as the International Monetary Fund, the World Bank and the American Chemistry Council, which show steady if unspectacular growth. But most of those forecasts, even the most recent ones, were researched before the oil price spiked.”

Most current forecasts were based on an oil price of around $80bbl–$110bbl, said Eastwood. Brent crude is currently above $120/bbl.

“[The oil price] does have the opportunity to influence things and cause a double dip but I have to go with what the experts suggest. We remember what happened in 1979–80 [oil price spike] but I’m not sure we have the same dislocation this time. I think speculation could be playing a bigger part. But I think that in some sectors, not least petrochemicals, there is the chance of a sudden fall.”

Eastwood said some European countries could also experience a double dip, and highlighted countries around the periphery with weak public finances and severe austerity measures.

Asked about chemical market sentiment in Europe, Eastwood said: “Buyers are complaining that prices are high but I remember 2–3 years ago the suppliers were in a dire position and closing plants. This is just part of the ups and downs you see in commodity markets.”

“Producing companies are probably taking a cautious view and are quite happy with high prices. They’ve seen what happens in the past when they’ve rushed to add capacity and seen prices plummet,” he added.

Read Paul Hodges' Chemicals and the Economy blog

By: Will Beacham
+44 20 8652 3214

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly