Oil and Inflation: Implications for European Corporates
KBRA Research
DUBLIN–(BUSINESS WIRE)–#creditratingagency–KBRA releases research that examines how Europe’s reduced sensitivity to oil price volatility is a positive development for the credit outlook of European energy companies. As outlined in a recent KBRA research report, this reduced inflationary pass-through bodes well for economic stability, which underpins the credit health of many borrowers.
KBRA has observed downward pressures on oil prices brought about by underlying supply and demand fundamentals, diminishing the role that geopolitics and the supply chain have on oil price setting. This dynamic suggests that the risk of extreme oil price spikes is moderating, which should also mitigate inflationary pressures to a degree.
In this report, we detail our views on how Europe’s reduced dependency on oil will impact the broader economy, with a focus on European Union (EU) energy importers, oil producing majors, and businesses in general.
Key Takeaways
- Inflation’s declining sensitivity to oil price shocks should support a more resilient macroeconomic environment and provide a stable backdrop for market-exposed corporate entities.
- Energy importers are benefitting from the structural weaknesses in oil price, while exporters are increasingly insulated through diversification and the broader energy transition.
- This improved outlook, however, does not fully eliminate commodity risks. Many corporate entities remain exposed to natural gas prices—often through direct sourcing or reliance on gas as a transition fuel—which may remain volatile despite the relative price stability of oil. This is because the historical correlation between oil and gas prices is decoupling, meaning stability in one market likely will not translate to the other.
Click here to view the report.
Recent Publications
- Oil’s Diminishing Role in Euro Area Inflation and Sovereign Credit Risk
- A Fractured Europe Faces Rising Fiscal Strain
- KBRA Comments on the Implications of the EU Trade Agreement for U.S. LNG
- Steady but Strained: Europe’s Path Through Mounting Global Challenges
- AI Adoption and EU Sovereign Credit Analysis
About KBRA
KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.
Doc ID: 1011867
Contacts
Karim Nassif, Senior Director
+353 1 588 1245
karim.nassif@kbra.com
Ken Egan, Senior Director
+353 1 588 1275
ken.egan@kbra.com
John Sage, Senior Director
+1 646-731-1452
john.sage@kbra.com
Garret Tynan, Senior Managing Director, European Head Project Finance and Infrastructure
+353 1 588 1235
garret.tynan@kbra.com
Oscar Dupagne, Senior Analyst
+353 1 588 1194
oscar.dupagne@kbra.com
Media Contact
Adam Tempkin, Senior Director of Communications
+1 646-731-1347
adam.tempkin@kbra.com
