IATA: 'Lower oil prices are good for growth'

IATA forecast (20-Sep-2024) that a "dramatic" drop in oil prices will be good for growth. Details include:

• The price of Brent crude oil is currently around USD72 per barrel, a 21% decline from the 2024 highs of USD91 per barrel and the lowest price since the end of 2021;
• The US, the world's number one crude oil producer, will see record output in 2024, according to the US Energy Information Administration. This is expected to drive global oil production, which the International Energy Agency forecasts to reach historic highs in 2024. IATA stated that as the oil market is sensitive to variations in supply and demand, these developments are the dominant factors behind the current fall in oil prices;
• IATA stated: "Lower oil prices are good for growth". Lower prices are expected to help curtail inflation and may allow central banks to loosen monetary policy further. Such expectations are already contributing to weakening the US dollar to a 2024 low, which lends further support to growth in most of the global economy;
• Airlines will benefit on the demand side, as GDP underpins air travel. As fuel represents around 30% of airlines' costs, lower oil prices will support profits and might help expand the currently estimated 3% net profit margin for the industry in 2024.
• IATA noted that the impact of the lower oil price on the relative appeal of sustainable aviation fuel (SAF) production is "hard to say". The association added: "However, with the near 20% net margins in oil and gas production, chances are that SAF investments still need some essential policy support". [more - original PR]