Iraq cannot afford to pay millions of workers and pensioners. Mexico’s grand plans to develop the country have been thrown into disarray. Ecuador is cutting government salaries, and Venezuela is on life support. Nigeria is seeking a nearly $7 billion emergency loan.
The coronavirus pandemic and the collapse in oil prices it has caused have created a monstrous calamity for countries heavily reliant on oil production for their economic survival, and forced others to change policies that no longer make economic sense.
While Russia, Saudi Arabia and the United States — the biggest oil producers — have large financial cushions, the precipitous drop in demand because billions of people have been forced to stay home has upended everything. It was a possibility even veteran industry experts did not foresee.
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“No one imagined a crisis of this scope. This was in no scenario,” said Daniel Yergin, an expert on global energy and vice chairman of IHS Markit, a research firm.
In the United States, where oil prices fell below zero this week for the first time ever — meaning sellers had to pay customers to take unwanted oil — the glut is threatening severe economic pain in what had been a thriving domestic industry. The oversupply also has forced the Trump administration to negotiate with Russia and Saudi Arabia to curtail production.
“The idea that we are energy dominant or independent is a fallacy,” said Jason Bordoff, a professor at Columbia University’s School of International and Public Affairs and founding director of its Center on Global Energy Policy. The global market’s effect on the United States, he said, has “revealed that when oil prices rise, we feel the pain, and when oil prices collapse, we need to call Moscow and Riyadh to do something about it.”
Here is a look at some effects of the oil-coronavirus shock in countries around the world:
Iraq will be harder hit than almost any other oil-dependent state, according to the International Energy Agency. About 90 percent of the government’s revenue comes from oil, and it relies on that money to support a payroll of more than four million workers as well as payments to pensions and welfare for the poor.
The government could just meet its costs when oil was trading at about $61 a barrel, as it was in December, but now it cannot meet the May payroll let alone pay for pensions, subsidies and its other operations.
“The problem starts in May,” said Mudher Mohammed Saleh, an economist and adviser to Iraq’s prime minister. “We’ll have a $4.5 billion gap monthly. What do you do? This is the headache.” ALISSA J. RUBIN, Baghdad
Even before the pandemic and the plunge in oil prices, Mexico’s economic outlook was poor, with some forecasters predicting its economy would remain sluggish, after entering a mild recession in 2019.
The federal budget relies heavily on oil production and exports, which means government income will now be sharply diminished. President Andrés Manuel López…
Read More: Oil Collapse and Covid-19 Create Toxic Geopolitical Stew
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