The Global Impact of Lower Oil Prices

Project Expert

Brad W. Setser

Senior Fellow

About the Project

Few prices matter more to the global economy than the price of oil. Over the past few years, oil has fallen from over $100 a barrel to around $50 a barrel today. Falling prices have reduced the export revenues of the world’s major oil exporting economies by about $1 trillion. Many of these countries’ economies are now being forced to adjust spending and imports to the harsh reality of low-for-long oil prices. Tracking how well the world’s oil exporting economies are managing the transition to lower oil prices is not just of economic importance as many large oil exporters also have obvious geopolitical importance. External breakeven prices, the price of oil that an oil-exporting country requires to cover its import bill, provide a simple and powerful metric for gauging vulnerability to low oil prices across countries and over time. A forthcoming discussion paper will highlight the evolution of the major oil-exporting countries’ external breakeven prices. A careful look at current breakevens, for example, highlights Russia’s relatively strong financial position, and Saudi Arabia’s potential vulnerability to a prolonged period of low oil prices. To facilitate tracking how oil exporters have adapted to swings in oil prices over time a new data interactive will allow individual oil exporters’ breakevens to be plotted over time against both the global oil price and against their peers.