Falling oil prices
Since the EU (European Union) is a net importer of crude oil, falling oil prices will have a positive impact on the economy. Oil and gas account for 7.3% in the SPDR EURO STOXX 50 (FEZ). Eni (EAA), Repsol, and Total (TOT) have weights of 1.8%, 0.74%, and 4.7% in FEZ. Aerospace company Airbus (EADSY) benefits directly from falling crude oil prices. Other industries like auto manufacturing and personal care are also impacted positively by lower crude oil prices. Personal care stocks like Unilever (UN) and L’Oreal (LRLCY) rose by ~15% due to low crude oil prices.
A report published by the Joint Research Centre states that the United Kingdom’s (EWU) oil product consumption is 20%–35%. Countries like Germany (EWG) and France (EWQ) have a ratio of around 35%–45%. The United Kingdom is the largest crude oil producer. However, it’s still a net importer of crude oil. Denmark is the only net exporter of crude oil in the EU. Other countries like Bulgaria consume oil products at more than 65% of its GDP (gross domestic product). It suggests that falling crude oil prices will have a positive impact on the economy. Since mid-2014, Brent crude fell more than 60% from mid-2014 to date.
Absolute impact on the GDP
In the current scenario, the report suggests that falling crude oil prices will have a positive effect on the EU nations’ GDP. Greece’s GDP could witness a 2.4%–3% positive impact due to lower crude oil prices. Germany and the United Kingdom could witness a positive impact of 30–60 basis points on the GDP. France and Italy could have a positive impact of 60–120 basis points on the economy.
The above graph shows the impact of falling crude oil prices on different EU economies. In the next part, we’ll analyze Airbus’ performance in 2015. It provided the highest positive return in FEZ in 2015.