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1.4.1 Oil prices and the financial markets

The collapse in oil prices in the second half of 2014 – with the price of crude oil halving between July 2014 and January 2015 – had a mixed impact on financial markets. Listen to the audio, a clip from BBC Radio 5’s ‘Wake Up To Money’ programme, to find out more.

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Figure 16 Price of Brent crude oil against the share price of BP and Royal Dutch Shell

By helping to reduce the overall rate of price inflation, the fall in the price of oil virtually eliminated the risk of a near-term rise in interest rates. This was ‘good news’ for the financial markets – although not for savers. However, the fall in oil prices was seen by some commentators as indicating a slowdown in economic activity globally – a factor that is not good news for equity markets and certainly not good news for the share prices of oil companies.