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Oil Price Drop: Who Will Feel the Pinch?

21st Century Wire says…

For the second straight year running, we are seeing a drop in oil prices and this translates to savings at the pump with many US states now enjoying prices below $2.00 per gallon. It’s also good for small to medium size businesses and translates into lower food prices (lower cost of transportation).

It also means that Fracking shale industry is no longer viable economically – which is good news if you are a fan of clean ground water.

The Saudis have spent around $100 billion of foreign reserves to keep shale and other low-cost oil producers out of business. Their decision in 2014 not to cut production has driven prices well below $50 a barrel. However, this is not good news for countries who are overly dependent on oil to support their entire economy. One such country currently in trouble financially is Saudi Arabia, who are now in debt and have no cash reserves left – for the first time in their history.

This also exposes the Saudi royal family additional risk of domestic social and sectarian instability at home.

Will too much debt cause petrol kingdom to lose its ability to project power internationally? Not necessarily, just look at the US who are $17 trillion in the hole, and still bullying the world. Russia is also dependent on healthy oil and gas prices in order to remain strong, and there are some pundits who believe that OPEC’s choice to keep prices down is a form of ‘economic warfare’ in a US-led effort to bankrupt Russia.

Time will tell who the winners and losers are, but one thing is certain in 2016 – someone is going to feel the pinch somewhere.


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21wire

21wire

We are a North American and European-based, grass-roots, independent blog offering geopolitical news and media analysis, working with an array of volunteer contributors who write and help to analyze news and opinion from around the world.
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We're covering news you won't necessarily find in the mainstream, and things which regularly confuse career politicians, FOX and CNN watchers... #SundayWire
@MrTdoney Good blog post. Would you mind if we republished that on 21WIRE? - 9 hours ago
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  • Mr Reynard

    Oil Price Drop: Who Will Feel the Pinch?
    #1 Yehudi Arabya ….