According to OPEC, the oil producers group, they are not going to change their minds because the prices of oil have gone down because they expect that the market will stabilize itself. The consensus of the OPEC members is to continue with production at current levels even in the face of the steep drop in crude oil prices. OPEC policies always remain to be a factor in global economies particularly since Brent crude has settled at below $62 a barrel, a steep descent that has affected energy stocks and currencies that are exposed to crude exports.
What does the steep decline in oil prices mean for the world?
Oil-rich countries all over the world depend on their oil revenues to balance their budgets and to sustain basic government economic programs. When the profits of these oil-rich nations go down, their governments are significantly affected and end up short of money. If the price of oil does not bounce back to its former $100 per barrel, countries that include Russia, Venezuela, Iran and Nigeria will be in a dire situation because they have to face budget deficits. OPEC’s decision to keep their production outputs unchanged to retain market share even if it negatively impacting oil prices has pushed investors away from Gulf equity markets. Dubai stock index fell by 7.6% Sunday which is the equivalent of a 1,313-point plunge in the Dow Jones industrial average. Saudi Arabia’s market fell by 3.3 %.
What will be the negative effects of cheap oil?
People will soon forget that they used to have the “go green” objectives. The low prices of oil will not help the global climate agreement that is currently being discussed in Peru. With the low price of gasoline, people will forget their bikes; instead they will start using cars which gives another reason to use alternative clean technology. There are already evidences that SUVs are making a comeback. However, a positive side is seen by a political science researcher of the University of Denver who has this theory that oil-dependent nations tend to be less aggressive when oil is cheap because they have less money in their coffers to spend on the military and gain more international clout.