Oil prices traded near a five-year low Tuesday, as global supply continued to outstrip demand. Since the start of the year, prices have plummeted close to 50%.
That decline has produced windfalls — or disasters — for a number of countries.
Here’s a look at four of the biggest winners and four major losers:
Existing sanctions on Iran for its nuclear program are keeping about 1 million barrels of Iranian oil off of world markets every day, according to the International Monetary Fund. With Iran already exporting less oil now than it would ordinarily, plummeting prices have further squeezed the country’s weak economic outlook. Iran’s government budgeted for an average crude oil export price of $100 per barrel, according to Al Monitor, a website that features Mideast analysis. A recent report from the Institute of International Finance concluded that since sanctions took effect in 2012, Iran’s gross domestic product has dropped 8.6%.
Africa’s largest economy relies heavily on a high oil price, and crude is its biggest source of income, accounting for about 75% or $50 billion, of the Nigerian government’s total annual revenue, according to a report by analysts at Deutsche Bank. The bank also estimates that Nigeria requires an oil price approximately twice the current level to achieve a balanced budget. Its currency, the naira, has lost 8% of its value recently, as oil prices fell. Adding to Nigeria’s woes, two oil unions went on strike this week, in part because the drop in oil prices has forced the government to slash its budget by 10%.
Its oil and other energy exports total approximately $300 billion annually. The International Energy Agency estimates that 68% of Russia’s foreign currency earnings come from the oil export business and around 50% of its annual budget is underwritten by the industry. Russia ‘s economy has been reeling from sanctions imposed by the West over its actions in Ukraine, and official Russian forecasts suggest GDP could drop 0.8% next year. On Tuesday, the ruble fell to a new low despite a move by Russia’s central bank to boost a key interest rate to halt the slide.
President Nicolás Maduro may need a higher oil price than any other OPEC nation. The country has an ambitious socialist program of government spending that is overwhelmingly pegged to oil-related receipts. It is running a huge deficit equal to 11.5% of the country’s GDP — $438 billion, according to the World Bank — and has borrowed billions from China. Falling oil prices almost certainly mean more economic hardship in a country where there are chronic shortages of basic consumer products, such as toilet paper, and the inflation rate is over 50%, among the world’s highest.
Japan, which relies heavily on oil imports, is a big beneficiary of lower costs, said Jamie Webster, an oil analyst at IHS, a consultancy. The savings may encourage Japan’s chronically cautious consumers to spend more so the government can ease back on a massive $725 billion annual spending plan to stimulate an economic expansion. Japan’s economy has been moribund for years despite attempts by successive governments to spur growth. Prime Minister Shinzo Abe is the latest to try. Lower oil prices may help him succeed.
The world’s most populous country is the second-largest consumer of oil after the USA. It races through about 10 million barrels of oil a day, according to Jason Gammel, a London-based oil analyst with Jefferies International, a global investment bank and securities firm. For China, which imports close to 60% of its oil, a lower oil price means consumers will spend more to offset a slowing economy. China’s GDP is expected to expand by 7.1% in 2017. From 1989 to 2014, China’s economy averaged an annual growth rate of over 9%, according to Trading Economics, an economic data provider.
As OPEC’s largest and wealthiest oil producer, Saudi Arabia has a lot more financial flexibility than other oil producing countries. It needs a high price to balance its budget, but it has a lot more oil in reserve than other members: some 260 billion barrels — equivalent to 16% of the world’s total reserves. At the recent OPEC meeting in Vienna, Saudi Arabia was firmly against cutting global oil supply to boost prices because it wanted to preserve its market share. A lower price may discourage expansion of the shale oil — or “fracking” — boom in the USA that has driven up global supplies.
Low gasoline prices for the world’s largest user of oil means more consumer spending for everything else and, thus, faster economic growth. Gas prices — the national average is down to $2.54, according to the Fuel Gauge Report — are the lowest in five years. However, lower oil prices may not be all good news, according to Jefferies’ Gammel. He said that while production growth in the U.S. is one of the catalysts for why oil prices have fallen so precipitously since June, the oil industry has added a lot of the jobs since the 2007-09 financial crisis. Sustained lower prices could put those jobs in jeopardy.