Since the end of summer 2014, the price of oil on the world market began to decline catastrophically. It has almost halved from $110 and is currently trading at $56. An international analytical company known as Bloomberg New Energy Finance conducted an analysis of the situation, trying to find out which countries have gained and which have lost from the collapse of the global fuel market.
Who won and who lost: a generalized opinion
Dealing with the question of who benefits from the fall in oil prices, it is worth saying that the exporting countries were the first to suffer from the sharp decline in the cost of "black gold". A striking example is Russia, where the main part of the budget was formed precisely through the export of fuel. The fall in fuel prices led to a sharp decline in commodity prices in the dominant sectors of the economy, in particular in the oil and oil refining sectors. The oil-importing countries have received certain advantages from the situation. After oil prices in Russia and in the world fell catastrophically, Europe,India and China were able to purchase fuel at an incredibly favorable price. Their enterprises found a new item of savings, which made it possible to receive large incomes. In the US, however, the situation is twofold. Some of the projects related to the development of shale oil have closed, as in the rest of the world. Other sectors of the economy got a chance to develop due to cheaper gasoline and a reduction in the cost of freight transportation. In general, the country benefited from the situation.
Resource-based economies hit first
As mentioned above, the price of oil on the market had a strong impact on countries with a raw type of economy. The states whose budget was formed on the basis of the cost of fuel suffered the most. Oil-producing states, in parallel with the catastrophic fall in the price of a barrel, felt an increase in the budget deficit. In Iran, a deficit-free budget is possible with a fuel price of $136 per barrel. There will be no shortage in Venezuela and Nigeria at $120. For Russia, the optimal cost of fuel is $94. According to Finance Minister Anton Siluanov, the Russian budget will lose 1 trillion rubles if the price of oil stays at $75 during 2015. Due to the fact that the price level of fuel is much lower than planned, the states have to cut 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 situation onThe market left a negative imprint on the economies of countries that were engaged in the implementation of projects related to the extraction of hard-to-recover oil. Russia was forced to stop the development of fuel in the Arctic, as the cost of production in this region is equal to 90 dollars per barrel. Vagita Alekperova, president of Lukoil, says that in the next few years, oil production in the country will be reduced by at least 25%. The projects, within the framework of which the development of offshore deposits of “black gold” was carried out, were significantly affected. New deposits of this type were actively developed in Brazil and in Norway, in Mexico and in Russia. The economy of each of the countries is under attack.
Market decline and the situation in America
The fall in oil prices in Russia and in the world affected America. American shale companies had to suffer serious losses. Shale oil fields in the United States have not been highly profitable, which has caused many of them to operate at a loss. A fairly large number of projects were frozen. The shale revolution, about which almost the whole world is talking, according to experts, ended in failure. Considering the fact that now the cost of fuel on the world market varies between 54-56 dollars per barrel, it is not worth talking about the colossal material benefits of the country from its own developments.
Who benefits from falling oil prices, or Conspiracy Theory
There are quite a lot of opinions and theories among world expertsabout who initiated the fall in oil prices. Within the framework of each concept, there is the fact that the countries that allegedly took part in the conspiracy had significant losses. Hassan Rouhani, who is the president of Iran, speaks of the fault of Saudi Arabia and Kuwait, who intended to reduce Iran's share in the world oil market. It overlooks the fact that these states bear almost the biggest losses in the world from circumstances. There are theories that tell 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 the fall in oil prices, some experts emphasize the desire of Saudi Arabia to destroy the American shale industry, as it is a threat to the country in the long term.
How are things really?
Analysts say that the fall in oil prices is a natural consequence of a whole 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 quantity of supply. The shale revolution in the United States, the return to the oil market of Iran and Lebanon, which until recently de alt with government issues and took part in hostilities. The US shale revolution itself not only stimulated an increase in supply on the market, it became a prerequisite for the exit of the largest consumer (America) from the market.
Step forward amid falling oil market
The systematically increasing price of oil over the years, imposedon the development of the economies of the world, makes it clear that in the past decade, fuel-exporting countries have benefited. For example, thanks to a sharp rise in prices up to the level of $120 per barrel, Russia managed to pay off its external debts very quickly. Today the situation is reversed. While highly developed exporting countries will experience economic decline and budget deficits, developing countries and countries that are not tightly tied to commodity markets can take a step forward and significantly balance the situation in the world market.
Specific gains and benefits from the collapse in oil prices
While OPEC, America, Russia and many other countries simply do not like oil prices, they play into the hands of a number of other countries of the world. The decline in the cost of "black gold" leads to a reduction in costs for many global enterprises. Transportation of goods falls in price, companies spend less money on the purchase of raw materials and on electricity. 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 will in fact only stimulate the development of the world economy. According to preliminary estimates, a 30% reduction in the cost of fuel increases and accelerates the growth rate of the economy by 0.5 percentage points. A fall in prices by 10% stimulates the growth of the GDP of states importing "black gold" by at least 0.1 - 0.5 p.p. States solve budget problems and improve foreign trade. China from 10% dropthe cost of fuel 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. Many of the weakened EU countries and most of Eastern Europe felt the benefits of the market collapse.
Are OPEC countries suffering from the situation?
Despite the fact that in order to eliminate the budget deficit in the OPEC countries, the cost of oil should be at the level of 120 to 136 dollars, the overall situation did not become a mortal blow for the economies. In fact, the cost of fuel production in the OPEC member states remains at the level of 5-7 dollars. To cover the countries' high social public spending, the government would satisfy the cost of Brent fuel in the region of $70. The refusal to reduce the volume of fuel production can be explained not by collusion, but by the experience of the past. When countries made concessions in the 1980s and 1990s in order to slow down the fall in prices, they were deceived and their market segment was quickly occupied by competitors. Although the decline of the economies is very strong due to the situation in the world, it cannot be called fatal. States continue to support their policy, according to which it is planned to increase fuel production by at least 30% annually.
What change do experts expect?
Considering who benefits from falling prices foroil, experts focus on the fact that the least developed countries and China received the most advantages from the circumstances. In this case, 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 research at Citigroup, is betting on a price range of $70 to $90 per barrel. In his opinion, it is this price that will allow underdeveloped countries to catch up with their developed competitors due to the suspension of 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 take positions in the world market.
Forecasts of the world's largest rating agencies
Forecasts for the future regarding what will be the price of oil in rubles and dollars, different experts disagreed insignificantly. Investment bank Morgan Stanley is betting $70 a barrel by the end of 2015 and $88 by the end of 2016. The forecast is based on the refusal of OPEC countries to cut fuel production. Rating agency Fitch presented more optimistic forecasts. Its representatives are talking about a price of $83 by the end of the year and a price of $90 for 2016. This is due to the expected decline in the growth of the economies of underdeveloped countries to 4%, which maychallenged by many other experts. Most of the experts agree with the opinion of colleagues and tie the real dollar exchange rate to the situation. The price of oil in the long term will be at least $100, and the main reason for this is the systematic depletion of fuel deposits with low profitability and an increase in the number of cars in the world.
Summing up, or the overall picture of what is happening
At first glance, nothing good could be expected from the fact that the price of oil began to fall catastrophically. Analytics and a deeper consideration of the issue made it possible to see positive aspects in the situation on the world market. The global economy took the situation well. According to Lagarde and according to preliminary IMF estimates, developed economies can expect GDP growth of 0.8% from the fall in oil, in particular, for the United States, this figure corresponds to 0.6%. The fall in the price of oil stimulates a fall in the price of fuel, which opens up prospects for higher spending on other goods and services. Recovery of economies and their development will become confident and stable. After the oil price was studied, analytics from Oxford Economics reported that at a price of $ 60 per barrel over two years, forecasts for GDP growth in China will be increased by 0.4%, in Japan and the United States by 0.1 – 0.2%.
