Oil falls below 30 dollars a barrel as world’s oligarchies tremble
Rome (AsiaNews) - For the first time since April 2004, this morning the price of oil fell below 30 dollars a barrel. The drop lasted very little: the "brent crude" - the title used as an indicator for crude oil in the international markets – rebounded from 29.96 to $ 30.22 in a few transactions. However, the record low is part of a trend that has been going on for 15 months: during this period, the price of oil fell by 70%.
Experts agree the decline will be permanent. Peter Pulikkan, industry analyst for Bloomberg Energy Intelligence, believes the threshold of $ 30 a "psychologically key for investors. This requires a total rethinking from players in this market. In 2015, crude oil has as its mantra 'less for more time'. Now we are in the phase of even 'less, for even more time.' "
This quick drop in prices is certainly due to the fragility of the Chinese economy. The "world’s factory" continues to produce less and less, and its energy demands are falling. The controversy raised by global warming and the clashes between the producing countries has also had an impact. But the real reason is the large supply of oil on the market and the general decline in demand. Added to this is the general socio-political instability in most oil-producing nations.
Daniel Yergin, an expert on energy policy and vice president of IHS, has no doubts: "The starting point is the overproduction of oil and the battle for market share among the producing countries. Coupled with this is the drop in Chinese demand and the geopolitical rivalry between Saudi Arabia and Iran, in the imminent return of Tehran’s oil onto the markets, we get this result. Eight years ago this would have been inconceivable. "
The petro-dollars, according to the Wall Street Journal, "are becoming petrocents. Now what we need to see is if the nations involved in the industry can withstand the change. " The reference is to Russia, Saudi Arabia, Iran and Venezuela: all are now demanding an urgent meeting of OPEC (Organization of the countries that export oil) to at least try to find a common line. This group – at least for now – does not include the United States: Washington has generated a kind of energy self-sufficiency in offshore drilling that could ensure the stability of the US market.
If the price stays at this level, then cuts to the various national budgets are inevitable. But the end point is the possible social instability caused by impoverishment that this could provoke, even leading to regime changes in repressive countries. An example, says the Jamestown Foundation, is Kazakhstan: the father-master of the nation, Nursultan Nazarbayev, has announced a series of liberalizations - a 100 point plan "towards the Kazakh dream " - with which he hopes to capitalize on the state industries and swell the coffers emptied by the collapse of oil prices. Reforms " however, taking place in a period considered too critical to be sincere."
Moscow is also running for cover. Russian Prime Minister Dimitri Medvedev, has announced that he intends to review the national budget for 2016 and asked the country to "prepare for the worst possible economic scenario, one in which the price of oil will continue to fall." The fees generated by the market for oil and gas make up about 50% of total national revenues: the budget for the coming year was based on an estimate of $ 50 a barrel. Minister of Finance, Anton Siluanov, says the total cost to cover "would be equal to an oilprice of 82 dollars a barrel. Without that figure, we have to make cuts".
The crisis has even hit the Gulf monarchies, which, however, have an easy way out: Qatar, Kuwait and the UAE are in fact guaranteed by the international rating agencies (all have a double "A" rating) . Should they be in need of liquidity, they may borrow money from the international community at the best interest rates. Russia (triple "B" negative) and Venezuela (Triple "C") do not have the same possibility.
Iran however, is not rated by international agencies because still subject to economic sanctions by the international community. The fourth-largest oil producer in the world - after Riyadh, Moscow and Washington - sees a constant improvement of its domestic economy as it loosens the diplomatic tension to it. And after 40 years of deprivation derived from US opposition even $ 30 per barrel would bring a boom for the entire population.
The nation most at risk appears to be Saudi Arabia. Its budget deficit last year reached 15% of gross domestic product, to the point that the government had to take special - and unprecedented - measures for moderation. This is not generosity, the Financial Times notes: "With a Shiite minority on the war path and the continuing threat of the Islamic State, it would be a great risk for the Wahhabi monarchy to challenge public resentment."