In November 2014 the OPEC countries met in Vienna and agreed to keep pumping oil to maintain their market share rather than cut production to support the oil price. In a postwritten a month later I addressed the question of how these countries were positioned to withstand an extended period of low oil prices and high budget deficits. More than a year has now passed, so it’s time to take a look at how they have done so far and to see what their actions presage for the future.
Results to date:
OPEC is known to have suffered economic damage as a result of low oil prices, but exactly how much? I made the following estimates from the October 2015 IMF World Economic Outlook Database. They include all the OPEC countries except war-torn Libya, where the data are not particularly meaningful. All the figures given in this post are in (or estimated from) US dollars unless otherwise specified:
GDP, 11 OPEC countries combined: Down from $3,392 billion in 2014 to $2,849 billion in 2015, a decrease of $543 billion.Budget deficit, 11 OPEC countries combined: Up from $17 billion (0.5% of GDP) in 2014 to $278 billion (9.8% of GDP) in 2015, an increase of $261 billion.
The economic damage has clearly been serious, but how much of it was a result of lower oil prices? Data from the 2014 OPEC Annual Statistical Bulletin indicate that OPEC exported about 8.5 billion barrels of oil in 2015 at an average “OPEC basket” price of $49.49/bbl. This is $46.80 lower than the $96.29/bbl average basket price in 2014 and represents almost $400 billion in decreased revenue. Allowing for the damping effect on other sectors of the OPEC economies it’s reasonable to assume that most if not all of the damage was done by lower oil prices.
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