There has been a lot of worry in the press recently about the current oil price fall, and the turbulence that the market is experiencing at this moment in time. Some papers are suggesting that we could be on the verge of another global financial crisis – a recession like the one that hit us in 2007/2008. This kind of prolonged economic downturn is always a reason for worry, but in this case, reports are telling us that there is nothing to be afraid of. It is not likely that we will be seeing another recession like our previous troubles, at least not as a result of the oil market’s ups and downs.
Risk Is Minimal
Most acknowledge that there is some risk of another recession – particularly if we get a repeat of a ‘Lehman moment’ – but that the risk is only a low one. Looking at the economic forecast right now, it is certainly not the most likely outcome. Banks are not as exposed this time around, and while some countries may be worse hit than others, the potential for a full-scale crisis is low. It would require oil prices to fall even further than they already have, and then stay there for a very long time. With the supply and demand of oil being as it is, it does not seem as though this is going to be the case. Again, while there may be some possibility of this happening, it is one of those potential outcomes which is more the stuff of worst-case fantasy than anything else. Businesses are weighing in to remind their clients and investors that the problem is not as big as it is being made out to be in the press.
If you are thinking of investing in the current climate as always you should be vigilant. Especially when looking at markets that might be affected by the price of oil. As an extra precaution it would be wise to speak to experts in the area you’re looking to invest in such as Vinta who offer asset management. By doing this you’ll get a real insight into the current climate of that business sector.
Papers obviously love to jump onto the bandwagon and pull up the next big scary headline that is going to generate a lot of clicks. There are a couple of problems with this tactic, however. First of all, many readers might see the headline but never go deeper into the article. For this reason, vague and unclear headlines which seem to twist the truth can be a very dangerous thing. Meanwhile, it is easy to take the worst case scenario and run with it – but a realist will see an entirely different picture. This is what non-experts need to take into account when they are look at articles about global economics: there is no situation which is black and white or clear to understand. Just about anything could happen, but the likelihood is that the market will follow a predictable pattern.
The current scare around oil prices is probably not going to be the last time that we hear about so-called recession risks, only to retrospectively realise there was very little risk at all. During this time, a steady hand is needed to keep investors reassured and prevent panic – which could in itself lead to crisis.