EU could save $80bn in energy imports if oil prices remain low

The price of oil has dropped over a quarter since the summer to below $85 per barrel, a level last seen in June 2010.

Energy imports for oil, natural gas and thermal coal cost the European Union around $500bn in 2013, with three quarters of that being spent to buy oil, research shows.

This year’s figure could fall by almost $25bn to around $485bn, and if oil prices average below $90 a barrel next year, the overall import bill could fall as low as $425bn, over $80bn less than paid by the EU for imports in 2013.

Falling energy prices reflect a darkening world economic outlook but they could temper any new downturn.

While headline inflation rates could be pushed lower, households and energy-intensive industries in countries that rely on oil imports will find their costs reduced, raising at the margin their ability to spend and invest.

“Global oil prices have fallen in almost every currency and that should lead to a boost in consumption,” Bank of America Merrill Lynch said on Wednesday.

Oil is the world’s most important fuel but coal is the most important for electricity generation. The price of coal has almost halved since 2011.

Inflation is already noticeable by its absence in most of the world and the euro zone is battling to ward off deflation.

Figures from China on Wednesday showed inflation hit a near five-year low of 1.6 per cent despite economic growth which is expected to hold above seven per cent this year.

The British economy looks robust yet inflation has dropped to 1.2 per cent and US inflation was last reported at 1.7 per cent.

Some analysts expect that vista to force more action from central banks.

“The low inflation readings will open the door to further targeted monetary and fiscal easing.

“There is also less need for a strong currency to offset imported inflation,” said a note from Credit Agricole.