Falling oil prices may cause new recession

The worldwide fall in oil prices could mean Norway will move towards a new economic downturn, predict experts on Wednesday.

Falling oil prices may cause new recession
Norway's consumers face an uncertain future. Photo: Sara Johannessen / scanpix

Two professors at BI Norwegian Business School (Handelshøyskolen BI) in Oslo have stated if oil prices do not return to the levels they were at a few months ago, then Norway may sink into a new recession.

In their report, their calculations are based on a drop in oil prices of 25 percent. The oil price today equals a price fall of 27 percent, Finansavisen reports.
How damaging the oil price fall may be for Norway's economy depends of the cause for the fall, and how long it will stay on a low level.
One of the professors, Professor Hilde C Bjørnland said to Finansavisen: “Most Norwegians will have to deal with less spending power due to the fall in oil prices.”
She is behind the report together with her colleague Leif Anders Thorsrud.
The researchers believe that the situation might result in a weakening of the Gross Domestic Product (GDP). A recession is declared when the GDP falls for two consecutive quarters.
Thorsrud believes that: “If the oil price remains low permanently, then we cannot exclude its effect on the Norwegian economy becoming greater”.
The consequence will be less investment, less employment, reduced real wages and a weaker stock market.
A year ago, one barrel of Northern Sea oil cost $107.90. On Tuesday the price fell to $78.27.

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