This is a question posed by Pierre Ciret, an economist at Edmond de Rothschild Asset Management, as he compares the first quarters of each year with an outlook for the rest of 2012.
“After the doubts of summer/autumn 2010, the first months of 2011 saw renewed confidence in economic growth and equity markets,” he says. “This winter-long optimism quickly faded away as indicators deteriorated, and serious concerns over European developments took precedence.”
Q1 last year ended with one event that nobody could predict (the tsunami in Japan) while the rising oil price and the European sovereign debt crisis is common to Q1 2011 and 2012.
“The parallel that can be drawn between the first months of 2011 and those of 2012 is striking.
Last year, Libyan production and exports were deeply disrupted by military action and the Brent reached $127, before easing to $105-115.
“This year, oil prices first reacted to tension in the Strait of Hormuz and then to the potential military engagement between Israel and Iran. The historically low stock, production difficulties in Nigeria, Yemen and Sudan all contributed to the hike, with the Brent reaching $128.”
Ciret argues that while the price may be rising to similar levels, it is not as negative economically this time around, adding: “Compared to the 2000 average, oil had risen 50% in Q1 2011. On the same basis, Q1 2012 prices are up by less than 10% compared to the 2011 average (around $110).
“While it is tricky to forecast the trend in oil prices for the year to come, on many fronts, oil consuming countries appear to be less vulnerable now than they did last year.”
