Crude oils wheels of central banks Investors looking at ways to prop up growth may want to look at another kind of liquidity: the central bank of oil. Brent crude has tumbled to its lowest levels in 18 months and dipped below $90 a barrel on Monday. Fears about global demand have weighed on prices. But Saudi Arabia, the world's top crude exporter, has added to supplies, cranking up output to a 30-year high. The effect has been startling. Since March, oil prices have declined by more than 30 per cent. After peaking at $128.40 a barrel this year, crude last week dropped to $88.49. The difference in price means that, at current levels of global demand, the effective transfer from oil producers to consumers will surpass $100bn in a month. Importantly, falling oil prices also act as a brake on inflation. Central banks looking at further monetary easing are able to worry less about adding to inflationary pressure. And, while fears over the global economy are contributing to the slide in oil, the impact of cheaper crude on petrol prices and household heating bills means consumers have more disposable income, too. "Our actions have helped the oil price drop ... which has acted as a type of stimulus to the European and world economy," Ali Naimi, the Saudi oil minister, said recently. Oil is a volatile commodity and lower prices may not last. At $90 a barrel, Brent crude is now below the Saudis" comfort zone, suggesting the kingdom may throttle back output to avoid a further build-up in inventories. Still, its decline should over time help big commercial consumers such as airlines, truckers and other transport operators while weakening profits for companies that drill for energy, analysts say. Fatih Birol, chief economist at the International Energy Agency, the western countries" oil watchdog, says Europe spent €32bn to import oil in March. This month, the bill is on track to be €27bn. In the US, oil imports cost $33.5bn in March, and will be $27.5bn in June, he says. Emerging economies, particularly China, Indonesia and India, should see fiscal burdens fall as lower subsidies are required. Amrita Sen, oil analyst at Barclays in London, says that lower oil prices especially help growth in the US, where low taxes on petrol make the price more responsive to moves in wholesale markets. The average price at the pump for regular petrol has already fallen from a peak of $3.94 a gallon in early April to $3.53 last week. The US Federal Reserve said last week that lower gasoline prices had helped spur a decline in inflation rates. It held off from embarking on a full-blown third round of "quantitative easing," or emergency bond-buying, to stimulate recovery, but could yet do so later this year. Fresh oil supplies from Saudi Arabia, as well as North America, are only one reason why prices have declined. Lower prices are also a symptom of weakening economic growth. "Yes, prices have come down, but they have come down precisely because economies are not doing well," says Lutz Kilian, economist at the University of Michigan. The question of what the oil price is doing to the economy is really ill-posed, because it's actually the economy that's doing something to the oil price. Mr Birol notes that oil prices are, by historical standards, still very high. Brent crude has averaged $114.2 a barrel so far this year, the highest January-to-June average ever, surpassing the averages for the same period in 2008, when prices hit a record high, and in 2011, when civil war in Libya cut oil supplies significantly. "If the global economy continues to deteriorate, I will not be not surprised if we see more downward pressure on prices," he says. The impact of the falling price on companies may become apparent later this year, when many start reporting results from the April-June period. But some anecdotal evidence already points to a boost from oil's decline. IATA, the commercial aviation trade group, recently forecast $207bn in fuel expenses this year based on an average jet fuel price of $126.50 a barrel. But the IATA jet fuel index has fallen more than $10 a barrel since then, suggesting savings of about $19bn. Consumers could benefit. Raymond James, the broker, says that with fuel prices lower, further air fare increases are unlikely into 2013 "and we may even see a slight decrease in average fares." Meanwhile, energy stocks have been hit, with ExxonMobil down 5 per cent, Chevron down 7.7 per cent and ConocoPhillips down 5.6 per cent since the start of the year. "The outlook for earnings for all these companies is deteriorating, and that's why the stock is deteriorating," says Fadel Gheit, energy analyst at Oppenheimer in New York.