Black gold deficits
Countries that suffer when the oil price plummets
By C.W., P.J.W. and L.P.
Countries that suffer when the oil price plummets
IN 2008 the oil price hit $140 a barrel. Today it is well below $90. Healthy supplies from America and weak demand (especially from China) have pushed down prices.
When the price of black gold falls, businesses and individuals cheer but oil-exporting countries suffer. According to research from Deutsche Bank, seven of the 12 members of OPEC, an oil cartel, fail to balance their budgets when prices are below $100. Last month Venezuela, a particularly inefficient member of the cartel, saw its bonds downgraded. One non-OPEC member in particular is in trouble: Russia. Economic growth is already poor. Further drops in the oil price could be very painful. After all, oil and gas make up 70% of Russia’s exports and half of the federal budget.
Will Saudi Arabia come to the rescue? It is the largest oil exporter and if it cut supply, prices could rise again. But this seems unlikely. The Kingdom is in the midst of a big fiscal boom as it tries to diversify its economy and improve living standards. For 2014, the Saudi Arabian government plans to spend $228 billion, up by 4.3% on last year.
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