The oil producing countries are preparing for a rough lap this year, with a precipitous drop in prices at the lowest levels in four years seen as the initial and alarming sign of impending turmoil.
A price drop benefits each country that tries to cut the fuel bill. But in the nations that produce oil, the lowest prices can feed economic problems and sometimes political disorders, since governments cut spending.
Analysts who had already foreseen the lowest oil prices due to the demand for softening between an increase in global production said that the possibility of a tariff commercial war and the overall climate of uncertainty could deepen the manufacturers' troubles.
“The strong dive at a price and overall volatility are sending a very strong signal that the global economy will be shocked this year and which will translate into a lower question of oil,” said Gregory Brew, a specialist in geopolitics of oil and gas with the Eurasia group, an organization of risk analysis based in New York.
The rich producers can be able to cushion the blow
At the beginning of this year, the price for the crude oil was stable by about $ 73 per barrel, high enough to support the budgets of most of the manufacturers. But some countries, such as Saudi Arabia and the United Arab Emirates, baskets of ambitious development plans on the price of at least $ 90 per barrel, affirm analysts.
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. Although Saudi Arabia pays for its Vision 2030 development program outside its annual budget, the huge and futuristic project of the city, Neom, depends on oil revenues.
To maintain those plans between lower prices, these richest gulf nations must draw money from their gigantic or loan reserve funds, analysts said. Saudi Arabia, the United Arab Emirates and Kuwait all have easy access to international credit and can support it for years with the improbable citizens who feel the effects, analysts have said.
A different story for Iran and Iraq
In Iran, international sanctions have reduced its oil customers. There is China, but its demand for oil has slowed down considerably in the midst of an economic slowdown. And there are small independent refineries vulnerable to secondary sanctions, which the United States have imposed to two of them in recent months. To attract buyers, Iran will most likely have to offer steep discounts, analysts said.
Iran is negotiating with Washington for the future of his nuclear program; Any agreement could lead to penalties. But it is unlikely this year.
Iran must also face growing pressure to reduce spending by lowering its subsidies for domestic energy. When he did it in 2019, the antigovernative revolts broke out and were strongly put. “Keeping energy prices very low is extremely important because they know that if they do not do it, they are relatively high of revolts, revolts and demonstrations,” said Homayoun Falakshahi, analyst of the Kpler research company.
Next, Iraq depends on the oil for about 80 % of the government's revenue, therefore a drop in the price would force him to take measures such as not paying the wages of the public sector for time blocks, a safe step of creating a domestic discontent. Since the country is not in the phase of sanctions, this too can borrow internationally to cover its bills, although this is expensive.
Vulnerability in Libya, Nigeria and Venezuela
The two governments of Libya each hold a different half of the country. One manages the bank that assumes oil payments from abroad and the others check the oil deposits. Any drop in prices would probably increase tensions between the two while they are fooled on the revenue, analysts said.
The economy of Nigeria remains terribly vulnerable to a drop in oil revenue, on which it depends to be helped to subsidize energy prices. A new private refinery almost completed could mitigate the type of fuel supply problems that can arouse political disorders.
Apart from Iran, the other global producer most exposed to prices volatility is Venezuela, whose economy collapsed during the drop in prices in 2014-15. The companies in the public sector and a payroll of the swollen government were so dependent on the high prices of oil that when they collapsed, the analysts said, the economic problems that followed them aroused widespread protests that the government put down violently.
The help of Russia and Iran has contributed to rise the potential repercussions this time, since it is unlikely that an increase in production and refinery capacity means that Venezuela has to face the type of fuel deficiency that caused widespread blackouts and has fueled public anger.
And then there is Russia
In Russia, about a third of the federal budget, based on about $ 70 per barrel for oil, comes from energy revenues. With penalties, Russia discounts its oil of about $ 10 per barrel; A price of $ 60 corresponds to the price limit imposed in 2022 after invading Ukraine.
The solid sales of oil and gas, in particular in China and India, have contributed to isolating normal Russians from many economic repercussions from the war. The Kremlin has already eaten in its reserve funds, however, and a further drop in prices would make payment for the war and everything else, challenging.
Moscow probably still has enough cash reserves to confuse, but in the short term there may be pain, analysts said.