The duo signalled they expect a prolonged period of subdued prices as they slashed investment budgets — BP by up to $6 billion and BG by as much as $3 billion.
While oil prices have bounced slightly this morning, on hopes that Saudi Arabia may be prepared to cut output at a later date, fears are growing that oversupply in the oil market will subdue prices for the foreseeable future.
In fact, low gas prices, along with sluggish demand for electricity in the aftermath of the recession, have kept power prices subdued (petrol prices are another matter).
Unemployment is high, real estate costs are falling, and so we'd expect inflation in such places to be subdued while prices in Germany face upward pressure.
But an era of souped-up growth in the BRICs Brazil, Russia, India and China appears to be over, which will do nothing to improve subdued commodity prices (chart 7).Despite the gloom, investors enjoyed 2012 (chart 8).
Add in the fact that broad monetary growth has been accelerating, and there may already be a case to raise interest rates now to prevent inflation rising, even if the bubble in equity prices is ignored.But a more important argument is that, even if consumer-price inflation remains subdued, roaring equity prices can still be harmful.
For consumers, low oil values keeps gas prices subdued.
Economists say Australia is importing much of its deflationary pressure, helping to keep prices subdued.
Weak economic growth, which has kept consumer prices subdued, and a backlash against multinational corporations may depress valuations, some professional investors argue.
Sharp declines in commodity prices, subdued global trade, weaker capital flows and currency pressures had combined last year to create a "particularly challenging external environment for commodity exporters", where most of the growth slowdown had occurred.
