What is the impact of the plunge in crude oil on the economy?
The plunge in crude oil prices has two effects on the economy. The positive impact is to reduce social inflation, lower oil prices and consumption cost, while consumption is counterproductive to economic growth. In addition, the clothing industry will also reduce material expenditure because of the sharp drop in crude oil. The negative effects include the debt crisis of shale gas enterprises in the United States, the new energy industry will face challenges, the economic recession of the industry will increase, and the deflation pattern may form.
For the whole world, the collapse of crude oil is good for oil-consuming countries and bad for oil-producing countries, but when oil-producing countries have insufficient income because of the collapse of crude oil, their own problems will affect the world economy. For example, crude oil continues to plummet, and the purchasing power of Saudi Arabia and the United States cannot be released, that is, the economy is in a downturn. However, their economic downturn will lead to the damage of foreign trade enterprises in China, and the related industries will not be able to gain profits.
After repeating this vicious circle, the whole world will gradually enter the Great Depression.