Venezuela, Ecuador, Iran, and Nigeria have been mentioned among those immediately impacted by falling oil prices; all of them are heavily dependent on oil revenues to fund government programs. Countries like Venezuela and Iran might be struggling to sustain the social programs that are run by their governments.
Jose Luis Chalhoub Naffah, head of BYBLOS Consulting in Caracas, agrees that social spending might become an issue for the country.
“There are going to be cuts in the national budget; not specifically on social expenditures, but on luxurious expenditures at the higher level government. But there is a point that when a cut is needed for social expenditures; that could be a big problem here,” Jose Luis Chalhoub Naffah said.
Venezuela needs oil prices to be roughly at $150 per barrel in order to balance its budget, while Iran needs around $140.
The Russian economy relies on oil for about half of its budget revenues and 60 percent of its export income. The government’s spending plans for next year had assumed that prices would stay in the $100-per-barrel range. Now that the oil price has nosedived, spending plans will inevitably be revised.
“Russia is, I suppose, somewhere in-between – it has certainly been helped by the fall in the ruble, given that a lot of local costs are in ruble terms, so balancing the government budget areas is easier,” Alex Griffiths, Managing Director at Fitch Ratings in London said.
The United States is among the countries impacted by low oil prices, and is likely to get a surprise of its own.
“The accepted wisdom is that falling oil prices are good for the US, obviously it has been some sort of local pain for the States. The big question that is on everybody’s mind is at what point do the US shale oil drillers decide to stop drilling,” Alex Griffiths said.
If one looks into that more deeply, it’s possible to see some other sides losing out in the current situation. More than $30 billion in equity was wiped off of the Australian share market after OPEC’s decision was announced, mining and energy stocks tumbled, and the giant global mining company BHP Billiton recorded its lowest share price in five years.