Oil prices across the globe have plummeted over the last year and a half, leading to significant revenue decreases in energy exporting nations and major cost savings in importing nations.
As of mid 2014, oil prices decreased from over $100 a barrel to less than $37 in December of 2015. The consistent oil pumping of the Organization of the Petroleum Exporting Countries (OPEC), coupled with the slowing demand from China and other countries, seem to be pushing the price to new record lows, with no prospects of increase anytime soon. Which nations were hit the worst? And which were the biggest beneficiaries?
In her article for CNN Money, Ivana Kottasova highlighted the five nations who lost the most due to the price fall.
First up was Venezuela. This nation has the world’s largest oil reserves and has used the money to pay for pensions, healthcare and social security benefits. Nonetheless, following the price drop, its economy is almost collapsing, with inflation levels reaching 150 percent in 2015 and even higher expectations for the year to come.
With 75 percent of its revenue coming from oil, Saudi Arabia was the second nation to take a major hit in 2015. Having nearly $100 billion dollars in deficit, the nation had no other choice but to announce strict austerity measures for 2016.
Nigeria, Africa’s biggest oil producer, was also in trouble in 2015. Oil accounts for 90 percent of the country’s exports and almost 75 percent of the government’s revenue. However, because of dropping prices, the nation has faced power cuts and fuel shortages throughout the year and many state employees have not been paid in months, according to CNN Money.
After suffering Western economic sanctions, the oil price plummet only made things worse for Russia. Nearly half of the nation’s government revenue comes from oil and gas and its budget had been set at an oil price of $50. However, oil is trading at a mere price of $37, leading to International Monetary Fund expectations of a 3.8 percent decrease in Russian GDP for 2015 and another 0.6 percent for 2016.
Iraq was the last nation to make the list. With the war against ISIS, the nation needed every last penny. Iraq kept pumping high amounts of oil this year in hope of compensating the oil drop, but the plan did not work. And despite huge oil reserves, the nation lacks the funds needed to access them.
The winners in this case might have some mixed feelings. In his BBC article, reporter Tim Bowler talked about the positive impacts falling oil prices have had in Europe and Asia. As Bowler sees it, a 10-percent fall in oil prices would lead to an economic yield increase of 0.1 percent in Europe, which in the case of its staggering economies would certainly be welcomed.
China and Japan, being major oil importers, are two Asian nations that have benefited tremendously from the price decrease. However, it might not be enough to offset the slowing Chinese economy, and might stimulate deflation in Japan. Finally, India has hope of decreasing its deficit now that the price of oil has decreased.
Goldman Sachs and Societe Generale experts predict that the price of oil could reach a maximum of about $51 in 2016’s second half. However, the price might plunge to $20 before it starts increasing again. Tom Kloza, chief oil analyst at the Oil Price Information Service, said he does not believe the price would rise to $100 anytime during the next 10 years, unless a major geopolitical event were to occur, according to CNN Money.
Oil prices can not fall forever, but the crash might get worse before it gets better.
Cover credit: businessgreen.com