OPEC countries, particularly in the Gulf, rely
overwhelmingly on oil revenues to finance their national budgets, social
programs, and development plans. For economies like Saudi Arabia, Kuwait, and
Iraq, crude exports still account for more than two-thirds of total income.
When oil prices tumble below US$70 a barrel, their fiscal
positions come under pressure. Budget deficits widen, subsidies become
unsustainable, and ambitious diversification drives, like Saudi Vision 2030,
face funding gaps.
For smaller OPEC producers such as Nigeria or Angola, the
pain is even sharper — lower prices mean currency depreciation, inflation, and
social unrest.
In contrast, the United States, despite being the world’s
largest oil producer, experiences a more nuanced impact. Lower prices hurt
shale producers in Texas and North Dakota, where high extraction costs make
many wells unprofitable when crude dips below US$60.
Bankruptcies, layoffs, and reduced drilling activity follow
swiftly. Yet the broader US economy benefits - cheaper gasoline boosts consumer
spending, cuts transport costs, and eases inflationary pressure — all positives
for growth and household budgets.
While US oil companies may bleed, the country’s economy as a
whole absorbs the shock better than most OPEC states can.
The fiscal and social dependence of OPEC members on oil
revenues magnifies their vulnerability. As against this, the United States —
with its diversified economy, flexible markets, and domestic consumption —
ultimately gains from lower energy costs.
In short, the current oil price decline hurts OPEC far more
deeply. For Washington, it is a mixed blessing; for Riyadh and its peers, a
financial headache.
Unless OPEC recalibrates its dependence on hydrocarbons,
every fall in crude prices will continue to expose the fragility of their
oil-driven prosperity.
