According to an article published in Oilprice.com, a global upheaval is likely to result from the oil price crash, upending the current fragile balance of power because key oil-producing countries, including Iraq and Nigeria, can’t buy their way out of this crisis with near-zero-interest loans like the Saudis and Americans can.
Oil Producing Countries in Trouble
- Even with Brent at $25 (indeed, even when it fell below $20), the Saudis were throwing around cash at all kinds of investments, including COVID-sinking cruise lines.
- The American shale patch can bail itself out if it wishes to, even amid desperate talk of looming bankruptcies.
- But in Nigeria, where oil comprises about 9% of GDP and 90% of exports, and with a break-even price of around $57 a barrel (with a fiscal breakeven of around $100), the economy is in serious trouble. If the economy is in trouble, the government is in even bigger trouble.
- Roughly 20 million people are unemployed, and that is now expected to climb another 25%. It’s enough to bring down a government, with the only lifeline now a $3.4-billion IMF emergency loan just approved.
- But making matters worse is the fact that no one even wants to touch Nigerian oil right now because there isn’t enough demand for it–even at $10 a barrel. And it’s competing with overproduced U.S. crude (light and low in sulfur).
- In Iraq, the fragility will translate into a boon for the Islamic State first and foremost, while Iran and the United States grapple for control in this proxy war setting.
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Source: Oil Price
