Petrol prices likely to remain high: BoI research bulletin
The price of petrol can only fall substantially if the global economy slows sharply or if refinery capacity expands, according to the latest Bank of Ireland global markets economic research bulletin.
The latter is not possible in the short-term and it will require a much steeper increase in oil prices to seriously slow the buoyant levels of global economic activity. Therefore, it is likely that petrol prices will remain at their current levels or even rise further in the short term, said the bank's chief economist Dan McLaughlin.
He added that inadequate investment in refinery capacity is one of the fundamental factors contributing to high oil prices and that oil prices do stay high it will prove positive for house borrowers with interest rates remaining low.
“The financial markets push longer term interest rates down when oil prices rise on the view that economic growth will slow, hence requiring less monetary tightening than previously thought (eg in the US) or none at all (eg the euro area). In that sense high oil prices have helped to sustain the housing booms currently in train in the US and across most of Europe”, he said.
