2. “The price of oil has collapsed again- Who are winners and who are losers”
Global oil prices have fallen sharply over the past few months.
From 2010 until mid 2014 world oil prices had been fairly stable.
Price now dipped below $50 a barrel for the first time since May 2009.
Significant revenue shortfall in many energy exporting nations.
3. Reasons:-
Weak demand in many countries due to insipid economic
growth
Surging US production
OPEC is determined not to cut production
Who wins and who looses?
4. Russia
• One of the world’s largest oil producers
• Oil and gas accounting 70% of export income
• Loses about $2billion in revenues for every dollar fall in the oil
price
• Warned Russia’s economy will shrink by at least 0.7% if oil prices
do not recover
• “Will not cut production”- ” If we cut importer countries will
increase their production and this will mean a loss of our niche
market”
5. Saudi Arabia
• OPEC’s most influential member, could support oil prices by
cutting back its own production but don’t.
• Two reasons- to instill fellow Opec oil producers and to put US’s
burgeoning oil and gas industry.
• With a reserve fund of some $700 billion can withstand lower
prices for some time.
• Middle east producers began to recognize the challenges of US
production
6. • Along with Saudi Arabia, UAE and Kuwait also have
considerable reserves which help them to run in deficit for
years if necessary.
• But things are different for other Opec countries like Iran, Iraq
and Nigeria.
War, ISIS capturing oil wells, large population size in relation
to their oil reserves- difficult to meet US competition
7. United States
• “Smaller oil companies faced higher barriers to entry due to
heavy investment requirement, but the situation have changed
due to lower-cost fracking technology.
• As a result oil supply continues to run into the market as
fracking companies are able to produce cheaply.”
• US oil production levels were at their highest in almost 30 years
“Gas and oil extracted from shale formations using hydraulic
fracturing or fracking, has been one of the main drivers of lower
oil prices”
8. Europe:- A 10% fall in oil price should lead to a 0.1% increase in
economic ouput, but eventually low oil prices do erode the
conditions that brought them about.
China:- Becoming the largest importer of oil, should gain from
falling prices, but lower oil prices wont fully offset the far wider
effects of a slowing economy
India- India imports 75% of its oil, and analysts say falling
prices will ease its current account deficit.
Cost of India’s subsidies could fall by $2.5 billion this year- but
only if oil prices stay low
