Petroleum -producing countries are preparing for a trip full of potholes this year, with a precipitated fall in prices at the lowest levels in four years seen as the initial and alarming sign of imminent agitation.
A price drop benefits any country that seeks to reduce its fuel bill. But in oil -producing nations, the lowest prices can feed economic problems and, sometimes, political disturbances, as governments reduce spending.
Analysts who had already been predicting lower oil prices due to demand softening amid a greater global production said that the possibility of a tariff trade war and the general climate of uncertainty could deepen the problems of producers.
“The strong immersion of prices and general volatility are sending a very strong sign that the global economy will vominal this year and will translate into oil demand,” said Gregory Brew, a specialist in the geopolitics of the Petroleum and Gas Syaasia.
Rich producers can cushion the blow
Earlier this year, the price of the reference oil remained stable of around $ 73 per barrel, high enough to maintain the budgets of most producing nations. But some countries, such as Saudi Arabia and the United Arab Emirates, base ambitious development plans at a price of at least $ 90 per barrel, analysts say.
Saudi Arabia and the United Arab Emirates have allocated hundreds of billions of dollars for giant projects to try to diversify their economies away from oil. Althegh Saudi Arabia pays for its 2030 Vision 2030 development program outside its annual budget, the huge project of the futuristic city, Neom, depends on oil revenues.
To maintain those plans in the lowest prices, the nations of the richest gulf in thesis have to extract money from their gigantic reserve or loan funds, analysts said. Saudi Arabia, the EAU and Kuwait have easy access to international credit, and can sustain that for years with citizens who do not feel the effects, analysts said.
A different story for Iran and Iraq
In Iran, international sanctions have reduced their oil clients. It is China, but its oil demand has loosen up significantly in the midst of an economic deceleration. And there are small independent refineries vulnerable to secondary sanctions, which the United States has been imposed against two of them in recent months. To attract buyers, it is very likely that Iran will have to offer pronounced discounts, they said analysts.
Iran is negotiating with Washington about the future of its nuclear program; Any agreement could bring relief relief. But that is unlikely this year.
Iran also faces increasing pressure to reduce spending by reducing their domestic energy subsidies. When he did in 2019, the anti -government disturbances burst and were put strongly. “Maintaining very low energy prices is extremely important because they know that if they do not, then they have a relatively high risk of uprisings, disturbances and manifestations,” said Homayoun Falakshahi, an analyst at the research firm.
Next, Iraq depends on oil for 80 percent of government income, so a price drop would force it to take measures such as not paying public sector salaries for time, a step that will surely create a national discussion. Since the country is not low sanctions, you can also borrow international to cover your bills, although that is expensive.
Vulnerability in Libya, Nigeria and Venezuela
The two governments of Libya have a different half from the country. One executes the bank that receives oil payments from abroad and the other controls the oil fields. Any price drop would probably increase tensions between the two as income made, analysts said.
Nigeria’s economy is still terrible vulnerable to a drop in oil revenues, in which it depends on helping to subsidize energy prices. A new almost complete private refinery could mitigate the type of fuel supply problems that can cause political disturbances.
In addition to Iran, the other world producer most exposed to pricing volatility is Venezuela, whose economy collapsed the duration of price drop in 2014-15. Public sector companies and a payroll of the swollen government depended so much on the high oil prices that when they collapsed, analysts said, subsequent economic problems generated generalized protests that the Government left violently.
The help of Russia and Iran has helped to release the possible consequences this time, since the increase in the production and capacity of the refinery means that Venezuela faces the type of fuel shortage that welcomed the generalized blackouts and fed public thinking.
And then there is Russia
In Russia, approximately one third of the federal budget, based on approximately $ 70 per oil due to oil, comes from energy income. With sanctions, Russia discounts your oil by approximately $ 10 per barrel; A price of $ 60 coincides with the price limit imposed in 2022 after Ukraine invaded.
The robust sales of oil and gas, especially for China and India, have helped to isolate the common Russians of many economic consequences of the war. However, the Kremlin has already eaten its reserve funds, and a greater price drop would make the war and everything else, challenging.
Moscow probably still has enough cash reserves to confuse, but in the short term, there could be pain, analysts said.
