Low Oil Prices Hurt Venezuela And Iran – And That’s Not Such A Bad Thing
With oil bouncing around at about in the low sixties, there are some anxious OPEC nations out there. But as you’ll see in the very instructive chart below, some are more anxious than others:
The following are estimates from Washington-based consultancy PFC Energy of how much various OPEC countries need on average to balance their external accounts.
OPEC Country 2000 2007 2008 2009 2010 Venezuela 26.54 81.01 90.96 99.88 102.68 Iran 12.42 49.73 57.32 86.33 83.31 Saudi Arabia 20.56 42.86 42.86 50.74 54.26 Kuwait 5.62 37.92 43.55 50.35 52.07 UAE 1.89 27.69 33.53 40.56 45.59 Algeria 21.24 14.27 16.85 17.94 30.85 Qatar 15.85 17.38 14.76 10.18 8.35
All of the Arab nations on the chart can live with oil being at about $50 dollars a barrel. In fact, a couple of them can live very well at that price.
However look at Iran and Venezuela. Venezuela is already in hot water as concerns balancing its external accounts. And that comes amid some unrest at home over diminished services, crime and corruption. The great petro-dollar spigot can’t keep up with the spendthrift Hugo’s big ideas.
Should oil stay in the area it is now for a protracted period of time, Chavez could be in trouble.
Iran, at the moment, is fine with the price of oil, but it also knows that its external obligations are going to jump significantly next year. It too knows, in the midst of existing economic problems, that if oil stays at the present price level, it too could see increased internal turmoil.
That helps explain why both of those countries are at the forefront of the effort to have OPEC cut production to drive up the price of oil. And, as mentioned earlier today, my guess is they’ll be at the forefront of cheating on their oil production limit when it is finally agreed upon. Given the numbers, they really don’t have a choice.
[Crossposted at QandO]