Since the end of the summer of 2014, the price of oil on the world market has begun to decline catastrophically. From $ 110, it fell by almost half and today is trading at $ 56. An international analytical company, known as the Bloomberg New Energy Finance agency, analyzed the situation, tried to find out which countries won and which lost from the collapse of the global fuel market.
Who won and who lost: general opinion
Dealing with the question of who benefits from a drop in oil prices, it is worth saying that the exporting countries were the first to suffer from a sharp decline in the cost of “black gold”. A vivid example is Russia, in which the bulk of the budget was formed precisely due to the export of fuel. The fall in fuel prices has led to a sharp decline in commodity prices in the dominant sectors of the economy, in particular in the oil and refining sectors. Oil importing countries have benefited from the situation. After oil prices in Russia and in the world fell dramatically, Europe, India and China got the opportunity to buy fuel at an incredibly favorable price. Their enterprises found a new savings item, which allowed them to earn large profits. But in the United States the situation is twofold. Part of the projects related to the development of shale oil has closed, as in the whole world. Other sectors of the economy got a chance for development due to the reduction in the cost of gasoline and the reduction in the cost of freight transportation. In general, the country has benefited from the situation.
Primarily affected commodity economies
As mentioned above, the price of oil in the market has strongly affected countries with a raw material type of economy. Most affected were the states whose budget was formed on the basis of the cost of fuel. Oil-producing states, in parallel with the catastrophic fall in barrel prices, felt an increase in the budget deficit. In Iran, a deficit-free budget is possible with a fuel cost of $ 136 per barrel. In Venezuela and Nigeria there will be no deficit at a price of $ 120. For Russia, the optimal cost of fuel corresponds to 94 dollars. According to Anton Siluanov, who holds the post of Minister of Finance, the loss of the Russian budget will amount to 1 trillion rubles if the price of oil during 2015 is kept at $ 75. Due to the fact that the price level of fuel is much lower than planned, states have to reduce costs and compensate them from the reserve fund.
Loss of profitability of new projects in the countries of the world
Low oil prices hit not only exporting countries; the market situation left a negative imprint on the economies of countries that were involved in implementing projects related to the extraction of hard-to-recover oil. Russia was forced to stop the development of fuel in the Arctic, since the cost of production in this region is equal to $ 90 per barrel. Vagita Alekperova, the president of Lukoil, says that in the next few years, oil production in the country will decrease by at least 25%. Projects in the framework of which the development of offshore deposits of “black gold” were significantly affected. New deposits of this type were actively developed in Brazil and in Norway, in Mexico and in Russia. The economies of each country are in jeopardy.
The fall of the market and the situation in America
The fall in oil prices in Russia and in the world has affected America. The American shale companies suffered serious losses. Shale oil deposits in the United States were not highly profitable, which led to the loss of many of them. A fairly large number of projects were frozen. According to experts, the shale revolution, about which almost the whole world speaks, ended in failure. If we take into account the fact that now on the world market the cost of fuel varies between 54-56 dollars per barrel, there is no need to talk about the enormous material benefit of the country from its own developments.
Who benefits from falling oil prices, or conspiracy theory
Among world experts, there are quite a lot of opinions and theories regarding who initiated the drop in oil prices. Within each concept, there is the fact that there are significant losses from countries that allegedly took part in the conspiracy. Hassan Rouhani, President of Iran, talks about the fault of Saudi Arabia and Kuwait, which intended to reduce Iran's share in the world oil market. The fact that these states suffer almost the largest losses in the world from circumstances is overlooked. There are theories telling about the collusion of Saudi Arabia with America, which sought to weaken Russia's position in the world. Considering the question of who benefits from a drop in oil prices, some experts emphasize the desire of Saudi Arabia to destroy the American shale industry, since it is a threat to the country in the long run.
How are things really?
Analysts say that the fall in oil prices is a natural consequence of a chain of events that took place in the world on the eve of the market collapse. In general, everything can be reduced to an increase in the number of offers. The shale revolution in the United States, the return to the oil market of Iran and Lebanon, which until recently were involved in resolving state issues and took part in hostilities. The shale revolution in the USA itself not only stimulated an increase in supply on the market, it became a prerequisite for the largest consumer (America) to leave the market.
Step forward amid falling oil market
The systematically rising oil price over the years, imposed on the development of the economies of the world, makes it clear that in the past decade, the exporting countries have enjoyed the benefits. For example, Russia, thanks to a sharp jump in prices up to the level of $ 120 per barrel, was able to very quickly settle foreign debts. Today the situation is reversed. While highly developed exporting countries will experience a decline in the economy and a budget deficit, developing countries and countries that are not closely linked to commodity markets can take a step forward and significantly balance the situation in the world market.
Specific Benefits and Benefits of Oil Price Collapse
While OPEC, America, Russia, and many other countries simply do not like oil prices, they play into the hands of a number of other states of the world. Reducing the cost of "black gold" leads to cost reduction in many global enterprises. Transportation of goods falls in price, companies spend less on the purchase of raw materials and on electric energy. Against the backdrop of the global situation, it has become common for importing countries to increase household incomes in real terms. The general negative background in the world in fact only stimulates the development of the world economy. According to preliminary estimates, a decrease in the cost of fuel by about 30% increases and accelerates the pace of economic growth by 0.5 percentage points. A 10% fall in prices stimulates the growth of the GDP of countries importing “black gold” by no less than 0.1–0.5 percentage points. States solve budgetary problems and improve foreign trade. China from a 10% drop in fuel costs accelerates economic growth by 0.1 - 0.2% due to the fact that in the country oil accounts for only 18% of total energy consumption. The situation favorably affects India and Turkey, Indonesia and South Africa, stimulates foreign trade and reduces inflation. The advantages of a market collapse have been felt by many EU countries with weakened economies and most countries of Eastern Europe.
Are OPEC countries affected by the situation?
Despite the fact that to eliminate the budget deficit in OPEC countries, oil prices should be between $ 120 and $ 136, the general situation did not become a fatal blow to economies. In fact, the cost of fuel production in OPEC member states remains at the level of 5-7 dollars. To block the high social public spending of countries, the government would satisfy the cost of the Brent fuel mark in the region of $ 70. The refusal to reduce fuel production can be explained not by secret conspiracies, but by the experience of the past. When countries made concessions in the 1980s and 1990s to slow down the fall in prices, they were deceived and their market segment was very quickly occupied by competitors. The decline in economies is very strong in connection with the situation in the world, but it cannot be called fatal. States continue to support their policy, according to which it is planned to increase fuel production annually by at least 30%.
What changes do experts expect?
Considering the question of who benefits from falling oil prices, experts focus on the fact that the most developed countries and China have benefited most from the circumstances. Moreover, the situation will not be in a static state forever, since at the moment the fuel is greatly underestimated. Its real value should be within $ 100. In the next few years, until the world economy is balanced, this price should not be expected. Edward Morse, Head of Global Market Analysis at Citigroup, is betting on prices ranging from $ 70 to $ 90 per barrel. In his opinion, it is this price that will allow underdeveloped countries to catch up with their developed competitors by suspending the development of the latter due to a decrease in income from the sale of fuel. The price of oil over the years shows that now it is the turn of young states to occupy positions in the world market.
Forecasts of the largest rating agencies in the world
Forecasts for the future regarding what the price of oil in rubles and dollars will be do not differ significantly from different experts. Representatives of Morgan Stanley Investment Bank are bidding for $ 70 per barrel by the end of 2015 and $ 88 by the end of 2016. The forecast is based on the refusal of OPEC countries to reduce fuel production. Fitch rating agency presented more optimistic forecasts. Its representatives talk about the price of 83 dollars by the end of the year and the price of 90 dollars for 2016. This is due to the expected decline in the economies of the underdeveloped countries to 4%, which many other experts can challenge. Most experts agree with the opinion of colleagues and attach the real dollar exchange rate to the situation. In the long run, the price of oil will be at least $ 100, and the main reason for this is the systematic depletion of fuel fields with low profitability and an increase in the number of cars in the world.
To summarize, or the general picture of what is happening
At first glance, it wasn’t worth waiting for anything good from the fact that oil prices began to fall catastrophically. Analytics and a deeper consideration of the issue allowed us to see positive aspects in the situation on the world market. The global economy has taken the situation well. According to Lagarde and according to preliminary IMF estimates, developed economies can expect a GDP growth of 0.8% from a drop in oil, in particular, for the United States this figure corresponds to 0.6%. The fall in oil prices stimulates a fall in the price of fuel, which opens up prospects for increasing costs for other goods and services. Economic recovery and development will become confident and stable. After studying the price of oil, analysts from Oxford Economics reported that at a price of $ 60 per barrel for two years, projections for GDP growth in China will be increased by 0.4%, in Japan and the United States by 0.1 - 0.2%.