(VOVworld)- The global oil market now has abundant oil supplies. The global oil price is forecast to go down further this year as there’s no sign of recovery. Immediate consequences are evident. Oil exporting countries are developing plans to cope with the fall of oil prices to maintain economic stability.
Oil tankers sit anchored off the Fos-Lavera oil hub near Marseille- Photo: Thomson Reuters |
The global oil prices fell sharply over the past two days. In London, the North Sea Brent North Sea crude for delivery in March tumbled to US$27.67, a low last witnessed in early November 2003. Meanwhile, in New York, the price of light sweet crude oil for delivery in February reduced to 28.36 USD per barrel, the record low in 12 years. According to the International Atomic Energy Agency, Iran’s returning to the oil market following the US and EU’s removal of economic, financial and energy sanctions has increased the oil supplies causing sharp declines of oil prices.
In face of oil price fall, oil exporters are making plans to prevent oil-based budget crisis. Russia has cut down budget spending, suspended a series of investment projects, and scaled down the state administrative system. The Russian government intends to reduce its dependence on oil prices by promoting the development of other potential sectors, especially those can replace exports. Russia is one of countries that are struggling with difficulties caused by oil price fall. Venezuela whose oil accounts for 96% of export value has declared the economic emergency state for 60 days to protect its citizens’ fundamental rights including education, health care, and housing. Inflation in Venezuela has reached 141%. The Venezuelan government has been forced to apply a series of measures including adding diamond and gems stones to its foreign currency reserves, seeking foreign loans, adjusting exchange rates, and cutting down public expenses. Saudi Arabia has increased prices of domestic essential goods including cement, electricity, water, and increasing taxes on the super rich.
Saudi Arabia plans to privatize the state oil and gas group, which is the world’s largest one. The Saudi Arabian Civil Administration will privatize all airports and aviation services until 2020. Iraq plans to issue international bonds worth 2 billion USD to compensate the budget deficit which is forecast to be equivalent to 17.7% of its GDP in 2016. Some other Gulf countries including Kuwait, Bahrain, Oman, Qatar and the United Arab Emirates are working out scenarios of levying business taxes for the first time to cope with the plunge of oil prices.
According to experts, without changes in OPEC’s policy or a suspension of supply, the global oil inventory will continue to increase through 2017. This poses a major challenege for countries whose budget depends on oil exports.