Global oil prices have dropped like a stone over the last few months. Back in 2014, oil was selling at around $110 a barrel, but it has now plummeted to a low of $47 a barrel. Whilst this is good news for the end consumer because it now costs a lot less to heat our homes and buy fuel for our cars, it isn’t so good for the countries whose revenues rely on money made from exporting oil. So who are the biggest losers in the oil slump?
One of the biggest losers right now is Russia. The Russian economy depends on revenues generated from exporting oil and gas and with oil prices so low the rouble is in big trouble. President Putin recently hiked interest rates to 17% in an attempt to prop up the rouble, but it didn’t help and the World Bank is warning that the Russian economy could shrink even further if oil prices don’t recover soon.
Of course Russia is not only suffering from the falling cost of global oil prices – it is also in a lot of pain as a result of western sanctions over the perceived support for Russian separatists in Ukraine. However, despite the economic woes Russia is experiencing, it isn’t planning to reduce oil production anytime soon.
Inflation in this beleaguered South American country is currently running at 60%. By rights, as one of the biggest oil exporters in the world, Venezuela should have plenty of reserves to fall back on, but thanks to gross mismanagement and ridiculously high fuel subsidies at home, the Venezuelan economy is on the brink of recession. There has been talk of raising gas prices, but this would be very unpopular with end consumers and the last time such changes were implemented, mass riots broke out.
Nigeria’s economy is growing, but it is still heavily dependent on oil revenue. Along with Venezuela, Algeria, Libya and Iran, Nigeria has little in the way of foreign currency reserves and doesn’t have a lot of room to manoeuver.
Are there Any Winners?
Many EU countries will welcome lower prices, but others less so. China imports a huge quantity of oil, but its economy is slowing and cheap oil won’t be a significant boost. Japan and India will also benefit, but it depends on how long oil prices stay subdued.
Will Consumers Benefit?
There is a suspicion amongst many that that the moment oil prices rise, energy companies are quick to push their prices up, yet when wholesale oil prices begin to fall, it takes an awful long time for the end consumer to benefit. Nevertheless, drivers have plenty to be celebrating with energy prices so low right now. It will cost you the same to buy auto body tools on the internet, but if you go and fill up your car with fuel, the prices are currently very low and you will be able to enjoy a lot more miles for your money.
Despite all of these woes, oil companies are still looking to create thousands of new jobs in an attempt to shore up an aging workforce and inject new skills into the industry.