Despite high expectations for talks to end with an agreement last week, on April 17, the world’s top oil producers failed to reach an agreement to freeze output which is aimed at easing global supply glut. OPEC met in Doha, Qatar. Saudi Arabia and Iran are said to be battling to keep market share. Even though the current oil prices seem to defy economic gravity so far, with the market share battle expected to rage on, the failure of the oil-freeze pact could set off another price drop and this could lead to significant revenue shortfalls in many energy exporting nations, while consumers in many importing countries are likely to have to pay less for fuel.
Major exporters have suffered billions of dollars in lost revenue previously from price slumps.
Nigeria is Africa’s biggest oil producer but lacks sufficient refining capacity and has to import most of its fuel. The country has an unhealthy dependence on crude oil as it accounts for 80% of all government revenue and more than 90% of the country’s export.
President Muhammadu Buhari has already said falling oil prices are having “a painful effect” on the country’s economy, he announced plans in December to raise government spending in 2016 by 20%, by seeking overseas funding.
Russia has been a prominent victim of plunging oil prices. About half of Russia’s budget revenue currently comes from energy exports.
The country’s currency the Rouble is under pressure from economic sanctions that the West imposed on the country for its involvement in the Ukraine conflict.
Government departments have been ordered to cut spending by 10%. President Vladimir Putin’s rating is sky high, at around 85%, but ordinary people are increasingly struggling with rising food prices.
Saudi Arabia’s income fell by 23% last year, highly significant in an economy where around 73% of of total revenue comes from the industry.
The country announced a budget deficit nearing $100bn. With no prospect of higher oil prices soon, experts say the kingdom’s conservative rulers are poised to introduce reforms, as they attempt to avoid political discontent. In December, king Salman raised the price of subsidised, cheap petrol by 40%.
Venezuela has the world’s biggest known oil reserves, and oil exports accounts for as much as 95% of the country’s revenues.
However, huge price falls in the past has slashed revenues by 60%, and people in Venezuela have been suffering from food and basic goods shortages.
Azerbaijan’s economy is heavily dependent on oil exports. Nearly half of it GDP comes from the oil sector.
The country’s currency the Manat, has fallen dramatically in value. With a volatile currency, the range of people suffering is increasing due to harsh economic conditions.
President Ilham Aliyev has ordered his government to draw up a series of special measures to revitalise his country’s economy in the face tumbling oil prices.
Analysts say Azerbaijan’s government has done little to improve other industries despite repeated warnings about dangers of relying on oil.
For some countries, it is mixed blessings. China, which is set to become the largest net importer of oil, should gain from falling prices. However, lower oil prices won’t fully offset the far wider effects of a slowing economy.
Japan imports nearly all of the oil it uses. But lower prices are a mixed blessing because high energy prices had helped to push inflation higher, which has been a key part of Japanese Prime Minister Shinzo Abe’s growth strategy to combat deflation.
India imports 75% of its oil, and analysts say falling oil prices will ease its current account deficit. At the same time, the cost of India’s fuel subsidies could fall by $2.5bn this year – but only if fuel prices stay low.
The oil freeze output would have been the first deal in 15 years reached by the oil cartel. From this, it is clear that soon, OPEC may no longer be the main driver of oil prices.