How the oil-price slump is reshaping the world
The slide in oil prices since last year – sparked partly by a decision by Saudi Arabia to flood the market in the hope of
crushing its shale-producing rivals in North America and hanging onto market share – is slowly changing the global
balance of economic power, says The Times.
The map above shows the world’s biggest oil importers (in yellow) and exporters (in dark blue). Unsurprisingly, with the price of Brent crude now below $50 a barrel, compared to $100 just 18 months ago, exporters have been hit hard by the slump.
Saudi Arabia – which produces oil at dirt-cheap prices but needs a high price per barrel to sustain current public spending – has been forced to raise money on global bond markets for the first time in eight years. Other Middle Eastern economies have been hit just as hard, while Russia, one of the largest oil producers in the world, is now in recession and could stay there for quite some time if the oil price drops much further.
Shortly before the slump, state-owned Gazprom tied itself into a £256bn 30-year oil-supply deal with China, which offers it no protection against a low oil price. Even at current prices, says the FT, the project is unprofitable. And Norway, which owns the world’s biggest sovereign wealth fund, built on oil profits, is having to dip into its savings as it faces a slump that is likely to cost the country more jobs than the 2008 recession.
None of this bodes well for political stability in the world’s more volatile regions. However, there have been plenty of winners too. Large importers of oil – including China, India and Japan – have benefited from falling costs, which in turn boost consumer spending.
The US has reduced its dependency on imported oil and is even starting to loosen its long-held ban on exporting oil, as a recent deal to swap supplies with Mexico demonstrates. On the other hand, there’s no doubt that the plunge has hit the fracking industry hard, with companies slashing spending.