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Page added on September 5, 2015
The Economies Getting Hit by Low Oil Prices
Oil prices are still under $50 a barrel due to a glut in production and OPEC’s—the cartel of oil-producing countries—price war. Some say that the OPEC is winning: U.S. energy firms have been making cut-backs this summer due to losses from the low prices. It’s good news for U.S. consumers though: Labor Day gas prices are expected to be the lowest in 11 years.
But lower oil prices are almost definitely bad news for the governments whose budgets are dependent on them being high: Saudi Arabia, ostensibly the leader of OPEC, is facing huge budget deficits this year due to decreased oil prices. According to the International Monetary Fund (IMF), the deficit will be about $140 billion.
Canada’s economy has also made headlines as low crude oil prices meant that the Canuck GDP shrunk for first half of 2015—putting the country in a modest recession on the eve of an election.
Major oil-producing countries—that list includes Venezuela, Libya, Russia, Qatar, and Iraq—are all taking a hit. Each of these countries have a different threshold for how low prices can go before their budget goes into deficit territory, but according to calculations by the Wall Street Journal and the IMF—only Kuwait can break even at the current prices. (In Deutsche Bank’s estimates, no one survives.)
For now, it’s still unclear when the oil price war will end—some analysts are expecting low oil prices to last for a while. Perhaps what’s even more unclear is who will come out on top at the end of it.
10 Comments on "The Economies Getting Hit by Low Oil Prices"
Makati1 on Sat, 5th Sep 2015 8:49 pm
Ah yes, great sources of real facts and accurate reporting, the IMF, NY Times, Deutsche Bank and The Atlantic. NOT!
onlooker on Sat, 5th Sep 2015 8:55 pm
Just propaganda !
penury on Sat, 5th Sep 2015 9:22 pm
I think that what the writer failed to write or did not know, PETRODOLLAR, Remember priced in dollars, paid for in local currencies, strong dollar has raised the cost of dollars by as much as 23 per cent for some.
Fat Lady on Sat, 5th Sep 2015 10:30 pm
Saying $50 oil glut price is cheap just keeps the charade going a little longer. So fill-er-up an go for a ride to your favorite vacation destination. That is if you still have a job to vacation from. TR-LAAAAAA
Solarity on Sun, 6th Sep 2015 12:41 am
Anyone else wondering how many dollars KSA, China, UAE, Kiwait, etc. have (or had) invested in US stocks. Facing huge deficits, they,re bound to be liquidating their securities. Hence declining stock markets.
Apneaman on Sun, 6th Sep 2015 12:42 am
America’s once magical – now mundane – love affair with cars
Cruising toward oblivion
http://www.washingtonpost.com/sf/style/2015/09/02/americas-fading-car-culture/
Boat on Sun, 6th Sep 2015 2:58 am
Solarity
Both China and the US were riding long term gains. The money will regroup and chase the bull again, just a matter of time.
Davy on Sun, 6th Sep 2015 5:55 am
Solar, check this ZH piece out. It says the markets health is in the Feds hand and dependent on a QT crashing the market because there is no choice followed by a new round of QE because there is no choice. The EM dump is part of the QT pounce.
http://www.zerohedge.com/news/2015-09-05/europes-biggest-bank-dares-ask-fed-preparing-controlled-demolition-stock-market
penury on Sun, 6th Sep 2015 1:15 pm
Yes lower gas prices are a positive for the consumer. NOT. If the price of gasoline dropped faster than the average wages I might agree, however prices are still historically high, state and local governments see this as a good time to increase taxes. (when prices rise,will taxes be lowered?) people who sell gas are getting less, so buying less. I have two vehicles, together they consume 12 gallons a week, my cheap gas is saving me 600 a year. Guess I will go buy something.
Kenz300 on Mon, 7th Sep 2015 9:02 am
Canadian tar sands are a very high cost producer…..
they are loosing money……..and going broke..