Is oil price plunge good or bad for global economy?

THE crude oil price has fallen to a four-year low. That should be a good thing, apparently, for the world as it is supposed to help catalyse economic growth. There are, however, strong arguments to make a case that it may not, and could in fact thwart the projected pace of economic growth in 2015.

To follow this argument, it is useful to understand the political economy of oil as a commodity, its price levels, and that cartel of oil-producing economies - the Organization of the Petroleum Exporting Countries (Opec).

First, it has been widely recognised that the decision of Opec countries, particularly its largest oil-producing member Saudi Arabia, to not cut production is strategic. Even though it could have boosted its profits by cutting production, and consequently raising prices, Opec opted for market share instead of price. Oil producers are concerned that high prices may result in them losing some market share to alternative energy source, notably shale from the United States.