Oil Prices Are Falling. Here's Where That Could Spell Trouble.
Oil producing countries are bracing for a bumpy ride this year, with a precipitous drop in prices to the lowest levels in four years seen as the initial, alarming sign of looming turmoil.
A price drop benefits any country seeking to cut its fuel bill. But in oil producing nations, lower prices can feed economic troubles, and sometimes political unrest, as governments slash spending.
Analysts who had already been predicting lower oil prices because of softening demand amid increased global production said the possibility of a tariff trade war and the overall climate of uncertainty could well deepen producers' woes.
'The steep price dive and overall volatility is sending a very strong signal that the global economy is going to be rattled this year and that will translate into a lower demand for oil,' said Gregory Brew, a specialist on the geopolitics of oil and gas with the Eurasia Group, a New York-based risk analysis organization.
Wealthy producers may be able to cushion the blow
Earlier this year, the price for benchmark crude held steady around $73 a barrel, high enough to sustain the budgets of most producing nations. But some countries, like Saudi Arabia and the United Arab Emirates, base ambitious development plans on a price of at least $90 a barrel, analysts say.
Saudi Arabia and the United Arab Emirates have earmarked hundreds of billions of dollars for giant projects to try to diversify their economies away from oil. Although Saudi Arabia pays for its Vision 2030 development program outside its annual budget, the huge, futuristic city project, Neom, depends on oil revenues.
To maintain those plans amid lower prices, these richer Gulf nations either have to draw money from their gargantuan reserve funds or borrow, analysts said. Saudi Arabia, the U.A.E. and Kuwait all have easy access to international credit, and can sustain that for years with citizens unlikely to feel the effects, analysts said.
A different story for Iran and Iraq
In Iran, international sanctions have whittled its oil customers down. There's China, but its demand for oil has slackened markedly amid an economic slowdown. And there are small independent refineries vulnerable to secondary sanctions, which the United States has imposed against two of them in recent months. To attract buyers, Iran will quite likely have to offer steep discounts, analysts said.
Iran is negotiating with Washington over the future of its nuclear program; any agreement could bring sanctions relief. But that is unlikely this year.
Iran also faces increasing pressure to cut spending by lowering its domestic energy subsidies. When it did that in 2019, antigovernment riots erupted and were put down with force. 'Keeping energy prices very low is extremely important because they know that if they don't, then they are at a relatively high risk of uprisings, riots and demonstrations,' said Homayoun Falakshahi, an analyst at the research firm Kpler.
Next door, Iraq depends on oil for an estimated 80 percent of government revenue, so a drop in price would force it to take measures like not paying public sector salaries for chunks of time, a step sure to create domestic discontent. Since the country is not under sanctions, it too can borrow internationally to cover its bills, although that is costly.
Vulnerability in Libya, Nigeria and Venezuela
Libya's two governments each hold a different half of the country. One runs the bank that takes in oil payments from abroad and the other controls the oil fields. Any price drop would likely ratchet up tensions between the two as they jockey over the revenue, analysts said.
Nigeria's economy remains terribly vulnerable to a drop in oil revenue, on which it depends to help subsidize energy prices. A new, almost completed private refinery could mitigate the kind of fuel supply problems that can spark political unrest.
Aside from Iran, the other global producer most exposed to price volatility is Venezuela, whose economy collapsed during the drop in prices in 2014-15. Public sector businesses and a bloated government payroll were so dependent on high oil prices that when they collapsed, analysts said, the ensuing economic problems sparked widespread protests that the government put down violently.
Help from Russia and Iran has helped leaven the potential fallout this time around, since increased production and refinery capacity mean Venezuela is unlikely to face the kind of fuel shortages that caused widespread blackouts and fueled public anger.
And then, there's Russia
In Russia, about one third of the federal budget, predicated on about $70 a barrel for oil, comes from energy revenues. With sanctions, Russia discounts its oil by about $10 a barrel; a $60 price matches the price cap imposed in 2022 after it invaded Ukraine.
Robust oil and gas sales, especially to China and India, have helped insulate ordinary Russians from much economic fallout from the war. The Kremlin has already eaten into its reserve funds, however, and a further price drop would make paying for the war, and everything else, challenging.
Moscow probably still has enough cash reserves to muddle through, but in the short term, there could be pain, analysts said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
23 minutes ago
- Yahoo
Tompkins County home listings asked for less money in May - see the current median price here
The median home in Tompkins County listed for $475,000 in May, down 2.5% from the previous month's $487,000, an analysis of data from shows. Compared to May 2024, the median home list price increased 2% from $468,500. The statistics in this article only pertain to houses listed for sale in Tompkins County, not houses that were sold. Information on your local housing market, along with other useful community data, is available at Tompkins County's median home was 2,240 square feet, listed at $216 per square foot. The price per square foot of homes for sale is up 6.8% from May 2024. Listings in Tompkins County moved briskly, at a median 39 days listed compared to the May national median of 51 days on the market. In the previous month, homes had a median of 34 days on the market. Around 92 homes were newly listed on the market in May, a 24.3% increase from 74 new listings in May 2024. The median home prices issued by may exclude many, or even most, of a market's homes. The price and volume represent only single-family homes, condominiums or townhomes. They include existing homes, but exclude most new construction as well as pending and contingent sales. Across the Ithaca metro area, median home prices fell to $472,000, slightly lower than a month earlier. The median home had 2,240 square feet, at a list price of $216 per square foot. In New York, median home prices were $699,000, the same as April. The median New York home listed for sale had 1,578 square feet, with a price of $435 per square foot. Throughout the United States, the median home price was $440,000, a slight increase from the month prior. The median American home for sale was listed at 1,840 square feet, with a price of $234 per square foot. The median home list price used in this report represents the midway point of all the houses or units listed over the given period of time. Experts say the median offers a more accurate view of what's happening in a market than the average list price, which would mean taking the sum of all listing prices then dividing by the number of homes sold. The average can be skewed by one particularly low or high price. The USA TODAY Network is publishing localized versions of this story on its news sites across the country, generated with data from Please leave any feedback or corrections for this story here. This story was written by Ozge Terzioglu. Our News Automation and AI team would like to hear from you. Take this survey and share your thoughts with us. This article originally appeared on Ithaca Journal: Tompkins County home listings asked for less money in May - see the current median price here
Miami Herald
38 minutes ago
- Miami Herald
Large oil producers around the Persian Gulf ramp up exports
LONDON -- As fighting between Israel and Iran intensifies, the major oil producers around the Persian Gulf, including Saudi Arabia, have been racing to load tankers with exports, possibly as a hedge against future disruption. These increases are occurring despite jumps in insurance costs and shipping rates and hazards like jamming of navigation systems. Analysts say these producers are preparing for the possibility that fighting could spread to oil export installations, which have been largely spared so far, or that shipping could be disrupted through the Strait of Hormuz, the narrow passageway from the Persian Gulf through which a large portion of both oil and liquefied natural gas travel. 'They want to make sure that they reduce the risks,' said Homayoun Falakshahi, head of crude oil analysis at Kpler, a research firm. 'That means export as much as possible, as soon as possible.' Kpler estimated that Saudi Arabia's oil exports had increased 16% through mid-June from the same period in May. Other producers in the region including the United Arab Emirates and Iraq have boosted shipments around 10%, Falakshahi said. The intent appears to be to put as much oil as possible on tankers and send it out of the Persian Gulf, mostly to Asian countries such as China, which are, increasingly, the main customers for the oil producers. Although countries like Saudi Arabia and the United Arab Emirates have improved their ties to Iran in recent years, having oil on tankers provides a buffer in case fighting spreads to their lifeblood industry. Even Iran, despite being the target of intense bombing by Israeli jets, appears to have managed a modest recent increase in exports, Kpler said. Because of U.S. sanctions on Iran, nearly all of its exports go to China. Prices for Brent crude, the international benchmark, have risen about 10% since June 13, when the conflict between Israel and Iran escalated. They dropped more than 3% Friday, to about $76 a barrel, after President Donald Trump said he would delay his decision on U.S. involvement for two weeks. There have been no serious disruptions to oil exports from the Gulf, but there are signs of increased concern about operating there. The number of empty tankers in the Persian Gulf ready to take on new cargoes has declined sharply, Falakshahi said, potentially indicating a future fall in exports. Marcus Baker, global head of marine and cargo at insurance broker Marsh McLennan in London, said war risk insurance for shipowners that did business in areas like the Persian Gulf had risen about 60% since the conflict started last week. Before, rates had been at modest levels. 'People are just a little bit nervous,' Baker said. Freight rates on large tankers from the Gulf to China have also risen about 50%, Kpler reported. So far, these added costs are not enough to deter shipping by themselves, Baker said, but there are increasing concerns about the welfare of ships' crews, who have been under stress from conflicts and other disruption in this decade, including monumental port delays during the pandemic. 'Crew welfare, crew safety, mental health of crew has become a big issue in the last few years,' he said. Shipping experts also report an increase in interference in the area with the satellite navigation systems used by ships to report their positions. This jamming, which has been unusually intense, is potentially dangerous because it can cause ships to appear in false locations on tracking systems and make it more difficult for owners to follow them. This article originally appeared in The New York Times. Copyright 2025
New York Times
40 minutes ago
- New York Times
Revisiting the Hunt: First-Time Buyers Share What Went Wrong and Right
Over the years, we've introduced readers to hundreds of home buyers in The Hunt. Many were first-time buyers trying to navigate the New York City housing market. This year, we caught up with a few of our New York hunters to find out how their stories unfolded. From fighting the elements, to loving the laundry room, to dealing with co-op boards. Here are some of those stories. Supported by The Hunt Sabrina Banta From a Starter Co-op to a Condo With 'New Energy' Both of Sabrina Banta's parents were real estate agents in her native Hawaii, so she felt confident in 2014 when she bought her first place, an HDFC studio co-op in a 20-unit building in Chelsea, with her parents' help. She was just 21, and the $294,000 purchase 'set forth a path of investing in real estate and getting me to the place I am now,' Ms. Banta said. Buying a co-op at such a young age was tough. She had to submit paperwork to the board — including references from employers. 'I was just getting my first job, and here I was asking people to write letters,' she said. Her first task was gaining board approval to remove the sleeping loft. Eight years later, selling the co-op was tough, too. It took 15 months, and the board rejected her first applicant. She lowered the price from $399,000, and it finally sold for $360,000. Qualified buyers had a lot of restrictions, as is common in HDFC co-ops: an income ceiling of $54,000 annually and a 50 percent down payment, among other things. Meanwhile, the low cost of her housing helped make a reality of her dream — owning a boutique hotel. Six years ago, Ms. Banta and her then-boyfriend spent $195,000 to buy a remote hunting cabin in the Catskills. They renovated, redecorated and transformed it into an Airbnb that promoted unique experiences, like walking a local alpaca. They sold it two and a half years later for $500,000. 'It was a labor of love and a proof of concept,' Ms. Banta said. Want all of The Times? Subscribe.
