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For Oil Producing Countries the Hits Just Keep Coming

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If the emerging reality of global net oil production rising is bad news for marginal oil producers, one can only imagine what this means of nations whose dependence on oil is disproportionate to more diverse economies such as the U.S and Canada, both of whom are expected to grow their crude output over the next few years.

The list of countries imperiled by OPEC’s attempt to out-maneuver US shale producers at the end of 2014 is significant and when measured by oil revenues earned in 2012, describes succinctly the toll on oil-dependent nations. OPEC nations, in particular, have felt the sting of their creation in definable numbers. In 2012, revenues for its 13 members from oil totaled $1,182.4 billion ($1.182.4 trillion). In 2016, revenues cratered to a mere $433.4 billion — a near-two-thirds loss in windfall economic activity from oil.

Though the first half of 2017 has seen an early turn of fortunes with oil moving to the $50 range, it’s hardly enough to help desperate economies who now face the prospect of $40 oil for the foreseeable future, despite OPEC/NOPEC agreements to cut back on excess oil production. The reality that the U.S will increase and therefore add 800,000 to 1 million more barrels, while Canada is on target to increase output 500,000 barrels by the end of 2018, suggests the pain borne by several oil-reliant nations, is about to get a lot worse. Grim news for countries like Venezuela, Nigeria, Angola and Algeria who have all suffered a four-fold decrease in output.

While economic diversification is the order of the day for wealthier producing nations, the same cannot be said for poorer states whose depleted finances are paving the way to social unrest and turmoil, all the while presenting challenges to global stability. So while low oil prices leading to lower energy and transportation costs may be a good thing in and of itself and certainly better than the alternative of high unaffordable prices, an economic crisis in certain parts of the world can lead to a contagion that can affect more robust and diversified states, in ways unexpected.

For some, oil may have lost its sheen and place as the king of commodities, but it’s importance to producing nations shouldn’t be dismissed or underestimated. A cheaper summer driving season may well have a hidden cost.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded tomorrowsgaspricetoday.com to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.

Oil At A Crossroads
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