The downfall of oil prices in the International market has concerned all in both positive and negative way. The impact of oil prices across the IMF’s membership since mid-2014 has had broad implications for the work of the IMF. In early 2015, IMF management established an interdepartmental working group to develop an integrated institutional view on developments in oil and other key energy markets and their implications for policy advice to member countries. Global impact of low oil prices differs among countries as per their need.
Talking about countries like Pakistan, it is a blessing, that is energy-starved and banks heavily on oil imports from global markets. It has, however, created nervousness in the government that sees the fall in global oil prices and other commodities as a threat to its revenue efforts as the country heavily relies on taxes on international trade for revenue generation. Pakistan collects 48% of its total revenue by levying customs duties and other taxes on imports.
Gulf Cooperation Council (GCC) producers such as Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar have amassed considerable wealth during the past decade through cash reserves and sovereign wealth funds. But even these countries could come under stress in the next decade if they continue to follow their status quo.
Newcomers such as South Africa, China, and Argentina are also getting ready to attempt to develop their reserves in a bid for energy independence. Argentina, which is furthest along, holds about 801 trillion cubic feet of shale gas and 27 billion barrels of technically recoverable “tight” oil reserves. China holds an estimated 1,115 trillion cubic feet of shale gas and 32 billion barrels of oil equivalent.
The current low oil price environment is not an “oil bust” that will be followed by an “oil boom” in the near future. Instead, it looks as if we have entered a new normal of lower oil prices that will impact not just oil and gas producers but also every nation, company, and person depending on it.