Research conducted by Barclays has determined that he falling oil price is having a talismanic effect on the cargo shipping industry, boosting consumer spending, raising U.S. demand for Chinese imports and improving the profitability of container shipping lines.
According to reports, the investment bank has increased its container volume growth forecast by nearly 1 full percent to 5.4 percent for 2015. Analysts believe this move was strongly influenced by the positive impact lower oil prices are having on consumer demand and the global container shipping industry. Barclays says they expect the rising growth will continue into 2016 and throughout 2017, when the bank expects a 5.2 percent year-over-year improvement in container demand.
From January 2014 through September, Brent crude oil prices averaged $110 per barrel before plunging to around the $40 level. For this year, Barclays predicts oil will average $44 per barrel. According to the bank’s sensitivity analysis, that implies a potential increase in China’s exports to the U.S. of almost 2 percent.
We expect a potential positive impact of lower oil prices on trade volumes due to higher discretionary consumer income. For example, the Barclays U.S. Equities Research team
estimates that a 20 percent decline in fuel prices could increase U.S. consumption by $70 billion.- Barclays
Industry analysts say that for every $10 decline in the oil price per barrel, there will be an additional $1.1 billion of consumer spending on Chinese exports.