For World's Oil Exporters, Falling Prices Have A Domino Effect : Parallels Falling oil prices have been good news for the U.S. But they're causing multiple problems for some exporters. Government budgets are strained. Economies are struggling. Currencies are crashing.

For World's Oil Exporters, Falling Prices Have A Domino Effect

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


We keep finding more people hurt by a seemingly good thing, cheap oil. Certainly drivers benefit, but cheap oil does not thrill environmentalists, who wish we'd use less. It's bad for hybrid car seller. It hurts small oil producers. We heard this week it's bad for Russia. And that's one of several producers watching their currencies collapse. Here's NPR's Jackie Northam.

JACKIE NORTHAM, BYLINE: Imagine if you're sitting back one evening, planning your holiday shopping list, knowing that every day you wait to shop, your money will be worth less. That's what's happening in places like Russia, Iran, Venezuela and other nations that rely heavily on oil exports and global energy prices. The value of the Russian ruble has a dropped more than 35 percent this year, a whopping 13 percent in November alone. Caroline Freund, a senior fellow at the Peterson Institute for International Economics, says the swift drop in prices caught many oil-producing countries off guard.

CAROLINE FREUND: Over the last few years, oil producers had gotten used to a situation where oil was above a hundred dollars a barrel. They'd just had money to burn. So they're spending money on, you know, handouts to the public, keeping people happy. They're exploiting their resources even more. And that's now on the decline.

NORTHAM: Freund says oil producers with large populations used to subsidies are being hit hard. So too are those countries without the financial cushion to ride out the price crash.

FREUND: It's hardest for these countries that don't have the reserves, really high reserves like a Venezuela or an Iraq or an Iran, as compared with a Saudi Arabia or a UAE or Kuwait or something where they've really piled up their reserves and can hold out for quite some time.

NORTHAM: Donald Dony, an energy analyst in Victoria, British Columbia, says part of the reason oil prices are so low right now is oversupply and, in part, a slowing demand in countries such as China. Dony says it's also due to a strong U.S. dollar.

DONALD DONY: At this point right now, you know, U.S.'s dollar is - U.S.'s economy is definitely hands and feet over top of just about anybody else out there - certainly better than Europe - and is stronger than in most of the Asian economies. And as the dollar goes up, other currencies start to go down.

NORTHAM: And commodities like oil are linked to the U.S. dollar. Countries with a weakened currency are likely to buy less oil, which in turn affects the exporting nations. But Georgetown University's Brenda Shaffer, who studies the energy industry, says while the current price of oil is at a more than four year low, it has been much lower in the past three decades, even when compared to today's prices. Shaffer says oil-dependent nations have always struggled through it.

BRENDA SHAFFER: And even President Putin himself has been president of Russia in every type of period of oil price, the low, the high, the crisis. You know, I think it's really nothing new for these governments.

NORTHAM: Still, Shaffer says countries that depend on a certain oil price to balance their budgets could be vulnerable to instability. But she says it's premature to think that nations will fundamentally change their foreign policy behavior because of the oil price crunch.

SHAFFER: Things like Russia pulling out of Crimea, Iran changing its stance on the nuclear program, things that these countries see as national interests they're not going to give up because of the oil prices.

NORTHAM: Shaffer says there's an intricate relationship between oil prices and geopolitics. She compares it to a kaleidoscope, where one change can set off a lot of unintended consequences. She says while some countries may take satisfaction that Russia is feeling a financial pinch, low oil prices could also signal a slowing in the global economy. Jackie Northam, NPR News, Washington.

Copyright © 2014 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.