The United States has begun to export crude oil after the U.S Congress lifted the 40-year old export ban with the first export shipments leaving in late December 2015.
As more U.S crude hits overseas markets, analysts say there will be Geopolitical and economic ramifications for most Petro-dollar states including our beloved Nigeria.
So who are the biggest losers? They include Russia, Saudi Arabia, Venezuela, Iraq and Nigeria.
RUSSIA
Fact Sheet: Russia produced 10.9 million barrels a day in January 2016 and needs oil revenues to fund nearly 40 percent of its budget.
Russia is in recession as it battles Western sanctions over its annexation of Crimea (formerly belonging to Ukraine).
It is also heavily involved in a war in Syria, where it supports the regime of Bashar Al Assad.
Bottom-line: With less money to throw around Russia cannot project power overseas like it wants or maintain social order at home. Russia will also lose influence in Europe if more European countries begin to buy American crude.
SAUDI ARABIA
Fact Sheet: The Desert kingdom produced 10.2 million barrels a day in January 2016 and needs oil revenues to fund up to 73 percent of its budget.
The Saudi Arabian economy is set to grow this year at the slowest pace since 2002 at 1.2 percent, according to IMF estimates.
Saudi Arabia, like Russia is involved in messy wars in Yemen and by proxy in Syria. The country has a largely young but restless population who have been paid off until now by the rulers to maintain peace.
There is also a Shiite minority that feels oppressed by the Sunni majority.
Bottom-line: Saudi Arabia has a population of about 30 million that is sitting in a Desert and imports all the food it needs. The loss of petrodollars would be hugely destabilizing for the Kingdom.
Saudi is known as OPECs swing producer.
If more U.S crude begins to land in Europe and Asia, it will further reduce the Saudi’s ability to influence oil prices.
VENEZUELA
Fact Sheet: Venezuela’s Output averaged 2.6 million barrels a day in 2015.
The country which is crippled by failing political and economic policies depends on oil for 95 percent of its export revenue.
The central bank released inflation and growth data for 2015 last Thursday, showing inflation surged to 180.9 percent by the end of the year and the economy shrank 5.7 percent.
Bottom-line: With an economy that is officially a basket case and huge population, with little else to export except oil, Venezuela will continue to be squeezed by more U.S oil exports.
The country which has in the past used oil to punch above its Geopolitical weight is beginning to be brought down to earth.
IRAQ
Fact Sheet: Iraq pumped a record 4.35 million barrels a day in January, 2016 according to the International Energy Agency.
The country which is mired in civil war between the state and Islamic State (IS) terrorists needs oil revenues to fund its crumbling infrastructure and buy military hardware.
The Middle East nation’s economy shrank by -2.4 percent in 2014, and the country needs oil revenues to fund up to 90 percent of its budget.
Bottom-line: Iraq needs all the oil revenues it can get without having to battle new suppliers like the U.S for market share.
After seeing most of its infrastructure destroyed from Gulf war one and two as well as the current war with the IS, Iraq (OPECs second largest producer) will be further hurt by a major push by the U.S to export its oil.
NIGERIA
Fact Sheet: Nigeria produced 2.2 million barrels a day of crude in January and is Africa’s largest producer.
The country is one of the oil poor OPEC countries however with per capita oil production that is lower than most OPEC countries due to its huge population of over 180 million.
Nigeria needs oil revenues for 70 percent of its budget and up to 95 percent of dollar earnings. Growth slowed to 3 percent in 2015 from double that level in 2014.
The naira has taken a beating in the parallel market, inflation is rising and the budget deficit should approach 3 percent of GDP for 2016.
Bottom-line: Nigeria needs fewer suppliers of crude oil in the international markets not more. The beginning of U.S crude exports is a threat to Africa’s largest economy unless it can dramatically diversify its exports base.
Imag credit Brittanica
