Slumping crude prices will lower inflationary pressures and benefit households and most businesses in Asia. However, in Singapore, for example, a prolonged decline is likely to hurt key sectors of the economy like marine and offshore engineering, as well as petroleum refining. Sluggish euro zone economies will get a small boost from lower oil prices, stimulating consumer and business spending.
Joerg Doerler, A.T. Kearney Principal and Head of Oil and Gas Practice in Russia and CIS, says some oil-consuming countries will see pretty nice benefits.
“A fall of $10 per barrel would lift the GDP in oil-consuming countries by around half a percent. So I think as a result of the falling oil prices we’ll actually see the big consuming nations benefitting quite considerably over the next one to two years.”
Now, a commonly held opinion is that the US, as the world's largest oil consumer, stands to benefit the most. On the other hand, Saudi Arabia, Qatar and Kuwait, who have the lowest production costs, are potential winners in the battle with their US rivals. Saudi Arabia is in a class of its own here. Some experts say it is the only clear victor in this oil battle – as one of the world’s top oil producers, the country can still make a profit even with lower prices, and it is gradually moving towards its key goal of squeezing US shale oil producers out of the market, thus strengthening its own position. Whether it will succeed remains to be seen, says A.T. Kearney’s Joerg Doerler.
“What Saudi Arabia is currently doing is basically testing the market. Saudi Arabia and some other OPEC nations are very much afraid that if they cut back oil production and prices remain at a high level then other producers will jump in. And audibly they’re looking at the US shale and unconventional resources, which have led to a very considerable increase in production.”
The question is how far must oil prices go down in order to squeeze out other market players, most notably, US shale producers.
It is quite tricky considering how fast the situation may change in just a couple of months – only this summer US production of crude oil surpassed all other countries with a daily output exceeding 11 million barrels per day in the first quarter of the year. Back then market watchers said the US had become the world’s biggest producer of oil, overtaking Saudi Arabia and Russia, and was likely to remain so till the year-end.