Analysis  |  9 July 2012

The political perils of low oil prices

By Matthew Hulbert

Oil prices have rapidly dropped in recent months, and some analysts predict a further (steep) decline. This might seem like good news to consumer states, but there is a catch. Whereas producer states could balance their budgets at $30 a barrel less than ten years ago, they now need $100 a barrel to make ends meet. If oil prices continue to correct, expect instability to hit producer states across the board. That might (ironically) help to set a price floor and push prices up again, but it's not a development that consumer countries should be happy about. Keeping oil prices at $100/b remains a better plan than seeing producer states collapse.

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