Bill Jamieson: fall in oil price and tech stocks hints at global recession

Could there be an economic threat bigger than Brexit? No issue has more preoccupied households and businesses than the protracted negotiations over withdrawal – and the accompanying political chaos. It has dominated everything and blinded us to an arguably more potent danger to our wellbeing: the gathering signs of a global downturn and recession in the year ahead. Two warning flares have signalled turbulence to come. The most immediate in the past week has been the sharp sell-off in the stock market of popular hi-tech stocks that have been the main drivers of Wall Street. Reports that Apple had cut production orders in recent weeks for all three of its new iPhone models and growing regulatory pressure on Facebook brought big falls in the much-favoured Faang stocks (Facebook, Amazon, Apple, Netflix, Google). Apple’s decision to stop giving a product sales breakdown has fuelled fears that a peak has been reached in worldwide demand for the current range of products. This, combined with the fading effect of US President Donald Trump’s tax cuts, has brought doubts to the fore. And while stock market movements do not in themselves create wider downturns, they are a barometer of investor confidence in future earnings and prospects. The second warning is both more diffuse and nearer to home: the continuing slide in the oil price. Barely a month ago the futures price of a barrel of Brent crude was $86.29. On Friday it tumbled a further 6 per cent to close at $58.80, taking the slide to 31 per cent in just six weeks. It is now at its lowest since December 2017 and further price falls at the petrol pumps are now expected. It is hardly the most encouraging news for North Sea operators, who had been hoping the oil price was on a long-term upward trajectory following the slump of 2013-14 that brought new investment and development to a near standstill. This ominous downturn was partly obscured by news that oil has started to flow from BP’s major Clair Ridge development 47 miles west of Shetland, discovered in the 1970s and expected to produce for the next four decades. BP expects production to peak at 120,000 barrels a day. Total recovery is reckoned at 640 million barrels. New platforms and pipelines required investment of more than £4.5 billion. The start-up has been hailed as a triumph of persistence and a significant moment for the UK’s oil and gas sector. However, recent global developments affecting the oil industry are causing disquiet. Trade wars, weakening emerging markets and currencies, and cuts to global economic forecasts for 2019 by the World Bank and the International Monetary Fund have caused the oil price to slide. There had been hopes that production cuts by Opec leader Saudi Arabia, non-Opec Russia and others would work to tighten supply and cauterise the loss of Iranian output and continuously falling production in blighted Venezuela.