(NaturalNews) Americans are breathing a small sigh of relief these days every time they pull into a gas station to fill up: Prices at the pump are the lowest they have been in years, and what’s even better is that a global oil glut fed in large part by massive new U.S. reserves in shale oil fields is expected to keep prices down for some time to come.
However, the collapse in the price of crude oil is also having some negative effects, and they will begin to manifest themselves more and more in the coming months in the form of rising social tension and unrest, say experts, especially in countries where oil keeps their economies afloat.
In addition to growing supplies, a stronger U.S. dollar and lower demand — consumers in the U.S., in particular, have responded to chronically high gas prices by purchasing more efficient vehicles — is also driving down prices. None of these factors are expected to change soon.
Since June, oil prices have lost about half their value, falling from about $100 a barrel to $55 a barrel as of this writing. They are expected to go lower, with some industry analysts predicting a floor of $40 a barrel.
There is already a plot afoot to essentially rally oil prices, and it is being led by the leader of OPEC: Saudi Arabia, a nation that relies almost exclusively on oil revenues to fund its monarchy and generous government entitlement programs (programs that keep the Saudi people obedient to the king).
Oil-dependent economies will be hit worst – and first
As reported by news website CentNews:
At the OPEC meeting on November 27, kingpin Saudi Arabia and other Gulf monarchies opposed a cut to the cartel’s daily output ceiling of 30 million barrels.
Analysts say they want lower prices, even if it slashes incomes, to counter the rise of US shale oil — which is more expensive to produce and eats into OPEC’s market share.
But other countries dependent on oil revenues — Venezuela, Nigeria, Iran, Iraq and Russia — want prices to rise sooner rather than later, “so they can balance their books and salvage their teetering economies,” CentNews reported.
And keep their people happy.
In Venezuela, for instance, the dramatic fall in oil prices has already triggered social unrest and political uncertainty regarding the socialist government, which was already dealing with shortages of basic foodstuffs and supplies for its population.
Following the recent OPEC meeting, Venezuelan President Nicolas Maduro ordered his government to dramatically cut the budget even further, which will only add to current social unrest there, political analysts believe.
Meanwhile, in Russia — whose economy is much larger but still suffering, especially after sanctions were imposed by the West following Moscow’s annexation of the Crimea and suspected military involvement in Ukraine — the country’s currency, the ruble. is collapsing. To compensate, the Russian central bank imposed a steep interest rate hike to 17 percent, but this has only sparked huge increases in consumer prices. Half of Russia’s government revenues come from energy exports.
Norway went in the opposite direction; as CentNews reported, the Nordic country lowered its rates in a bid to counteract the impact of falling prices and stimulate the economy.
Low oil prices may eventually rebound by driving economic growth and, thus, renewed demand
As CentNews further reported:
In the Middle East, Iraq — which is battling Islamic State (IS) militants — will take a major hit from the plunging cost of crude, according to expert Richard Mallinson at consultancy Energy Aspects.
“For now the Iraqi prime minister (Haider al-Abadi) is managing to hold together his political coalition and has halted IS advances with various international support,” Mallinson said. “Iraqi politicians will find it difficult to cut spending in the current context and so the country is potentially facing a serious economic crisis in the next year or two.”
Other analysts believe that tanking prices will drive economic growth, which will stimulate more energy use and eventually lead to higher prices again.
What happens in the world in the meantime, however, could prove interesting, to say the least.