Many oil rich nations are currently
hurting because oil prices have dropped from around $100 a barrel to $83 a
barrel. Iran, Nigeria, Venezuela, Russia, and Saudi Arabia are all hurting
because they based their government budgets on high oil prices. Since the oil prices have dropped so much
they are going to have to make some tough cuts in order to stay afloat. To make
matters worse, all these countries continue to keep producing oil at the same
rate, driving down the price of oil even more. They keep producing the same
rate because they don’t want to lose market share for when the prices go back
up. Also contributing to the drop in oil prices is a new supply found in the
U.S, causing oil prices to go down even more. These oil rich countries need to
make budget cuts quickly otherwise they may default in the new future.
I think that this is important for not only the macroeconomy, affecting world pricing, but also many micro economies. The economies of the countries who produce the oil are negatively impacted but the lower price could allow foreign economies to place funds that would have been spent on oil in other beneficial places.
ReplyDeleteAt the same time, these countries should have looked more closely at their economic forecasts and not depended so much on the high oil prices for national income.
It's just interesting to note, how a government budget along with many businesses in these areas can be hurt by this. Another factor that may play a role is the rising value of the US dollar which is hurting the value of oil in their home countries affecting the budgets more.
ReplyDeleteIt is great that the United States has a source of oil. They will still depend on foreign imports, but to a lesser degree. The prices for almost all goods fluctuate with time, so it won't be long until the prices recover. However, it will be interesting to see which countries manage to maintain the market share of the oil industry. Some economies are largely dependent on the oil industry so they may issues going forward.
ReplyDeleteIt's interesting how these countries are so dependent on oil prices and that it's the main driving factor of their economy. Obviously, the US is the biggest economy in the world, and such a drastic change in oil prices in the US will have a drastic effect in other countries. I'm interested to see what these countries end up making budget cuts, which they should probably do, or wait until oil prices rise again.
ReplyDeleteThese countries economies are solely driven on the income of oil and with the price being driven down to $83, thats almost a 20% decrease in price yet they are producing the same quantity. For the U.S. this is great news due to the fact that we don't mass produce oil, yet a new supply was found driving prices down even more for our nation .
ReplyDeleteFor the oil dependent economies such as Iran and Saudi Arabia and the others, it is time to start looking for new industries to invest in. If they do not find other industries to for their economy to invest in they will severely suffer when their oil sources are depleted.
ReplyDeleteWhile the drop in oil prices has been beneficial to consumers, it's clear that it has been detrimental to the oil-rich nations. It's surprising that they are all still producing oil at the same rate. I wonder if the increase in demand for oil since the price drop has helped these countries out at all. It will be interesting to see what kind of budget changes are made in the coming months.
ReplyDeleteDrop in oil prices in the international market has a very adverse effect on major oil rich nations and due to their major stake in oil production it has been a predicament for them to reduce their extraction as to stop the further drop of oil prices. I agree with the point that they may require some harsh budget cuts to reduce the chances of future defaults.
ReplyDelete