Over the past year, global oil prices have seen a dramatic fall. This oil collapse, with prices today reaching below $30 per barrel, has the potential to have profound geopolitical consequences.
So who are the possible winners and losers of the falling oil prices?
Russia
As one of the world’s largest producers, Russia will undoubtedly be affected by the oil crises. The World Bank has already warned that Russia’s economy could shrink by at least 0.7% if the oil prices do no increase. This is following data confirming that Russia’s economy loses $2bn of revenues for every dollar fall in the oil price. Despite warnings, Russia has confirmed that it will not cut its production to level out prices with Alexander Novak the Energy Minister saying; “If we cut, the importer countries will increase their production and this will mean a loss of our niche market,”.
Saudi Arabia
Similarly to Russia, the world’s largest oil exporter could also support global prices by cutting back on production but shows no sign of doing this. With reserve funds of approx $700bn, Saudi can withstand these low prices for some time however will need oil prices to be up at around $85 for the long term.
Nigeria
Africa’s top oil producer and with crude sales funding 75% of the country’s budget, Nigeria will ultimately face huge consequences to its economy. Despite warnings, the falling oil price is not preventing the Nigerian government’s new big spending plans, which analysts have warned is a bad idea in the current climate. Chuba Ezekwesili, a research analyst at Nigerian Economic Summit Group has said: “They’re sort of delaying the inevitable. I feel like eventually it has to give way, and by the time it does I feel the economy is going to be hurt because a lot of businesses can’t work under those conditions.”
United States
The picture in the US is looking slightly more complex. Whilst the government has noticed consumers benefiting from the lower prices in petrol, which is fueling consumer spending, the collapse in oil price is predicted to cast a shadow of the US energy industry. Due to cheap oil prices, fracking has become less attractive to investors leading to losses of tens of thousands of jobs.
