The test of oil exporter countries with oil - ERDAL TANAS KARAGÖL

The test of oil exporter countries with oil

If we were to ask, “What was the most important topic in terms of energy in 2015?" the answer would undoubtedly be, “the dramatic fall in petrol prices."

The countries that have been negatively affected by this are of course the countries that export petrol, especially those that keep their economies alive with petrol. Besides, the countries that export petrol (members of OPEC) drill oil with the lowest of costs.

The cost of Kuwait, a member of OPEC, taking out a barrel of petrol is $8.50, Saudi Arabia's cost is $9.90, Iraq's $10.70, the United Arab Emirates $12.30 and Iran's is $12.60.

Despite oil drilling prices being so low, the cost of petrol rising to $35 is a great risk for these countries. The Saudi Arabia report prepared by the IMF has declared this risk too.

Saudi Arabia, the country with the lowest oil drilling prices among the 13 OPEC countries, is now experiencing a serious budget deficit due low oil income. Moreover, if oil prices continue in this trend, the IMF has predicted that Saudi Arabia will go bankrupt in five years time.

It is hard to estimate whether Saudi Arabia will go bankrupt or not, yet we can make the following inference. If oil demand continues the same way in 2016, a barrel of oil may even see a $20 low. It seems that 2016 will be a tough year for countries that sell oil under $80, according to disaster scenarios.

It is even harder for countries that have high oil drilling prices. For example, with oil drilling costs being above $35, countries like Columbia, Norway, the US, Canada, Brazil and the UK might give up on oil.

Thus, 2016 might be a more constraining year for countries that produce oil and have economies particularly dependent on oil. Besides, Iran is preparing to enter the oil market. And of course there is a vicious cycle in which oil-exporting countries are struggling: They need oil revenues, therefore as their revenues decrease they will lean toward the oil supply. Different views on lowering oil supply, invalidate the “reduce supply, so oil prices can increase" method.

IS IT THE DUTCH ILLNESS?

Countries rich in terms of oil resources have enjoyed the pleasure of high revenues for years. They prioritized this sector, disregarding all other sectors of economy, and basing their economy solely on oil. After Holland discovered natural gas, most funds were transferred to this sector. Focusing on a single export good and the sudden change in its price, turned the equilibrium upside down.

It seems that the “Dutch disease" will affect all oil supplying countries. If Saudi Arabia and Russia are diagnosed with the “Dutch disease," they will not recover easily. If Saudi Arabia comes to mind when we say oil, and Russia when we say natural gas, it means these two countries will be extremely affected by the “Dutch disease."

How is the drop in oil prices affecting Turkey?

As a country that exports energy, the drop in oil prices means the price of energy exports will decrease as well as the current deficit. There will be ease in the highest-costing energy sector in terms of economic production. The risk of high energy prices pressuring inflation will also be low.

We are in a period in which having oil resources is a disadvantage and a risk. Therefore, countries that import oil should make the most of this opportunity.



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