OPEC member countries last year registered their first collective budget deficit since 1998, the group said Wednesday, the result of an oil-price slump that dropped government petroleum-export revenue to a 10-year low.
In its annual statistical report, the Organization of the Petroleum Exporting Countries illustrated how an oil rout that has cut prices in half since 2014 has weighed on the economies of crude-dependent states. OPEC members ran a combined deficit of $99.6 billion in 2015, compared with a surplus of $238.1 billion in 2014.
The last time OPEC ran a collective deficit, in 1998, a financial crisis had slammed Asia's economy and competition by Iran and Saudi Arabia for market share drove OPEC's oil prices down to about $10 a barrel.
Prices recovered over the ensuing decade. After a sharp but brief decline following the 2008 financial crisis, oil hit $115 barrel by mid-2014.
Then the latest crash began. Increased production in the U.S. and slow Chinese demand helped create a world-wide oil surplus. Talks between OPEC members in recent months failed to generate a production cap; now oil is trading for about $50 a barrel today.
As a result, petroleum export revenue for OPEC countries fell by 45.8% from 2014 to $518.2 billion last year. Petroleum revenue last year was the lowest since 2005. The statistics include Indonesia -- which rejoined OPEC last year -- but not Gabon, which returned to the cartel in June.
OPEC governments' response to the oil-price crash has compounded their budget problems. Since 2011, several OPEC members have boosted spending on state jobs and infrastructure following the Arab Spring revolutions toppled dictatorships in Libya and Egypt.
Pain from the price crash is most evident in Venezuela. The strapped country has shortages of food and medicine and is running a budget deficit equivalent to 20% of its gross domestic product, the World Bank says. It narrowly avoided defaulting on a $1.5 billion bond in February in part by draining its foreign reserves.
Since the end of 2014, Nigeria has spent about 20% of its foreign reserves. And Saudi Arabia, which toppled Russia as the world's largest crude producer last year with 10.19 million barrels a day, is also under pressure. In 2011, it increased its budget by a quarter, doling out bonuses and building cheap homes for government staff.
In December, officials said the government ran a record deficit of nearly 367 billion Saudi riyals ($98 billion), or about 15% of GDP. It is now planning to cut spending by 14% in 2016 with measures including reducing fuel subsidies and squeezing cheaper rates from oil contractors.
By: Benoit Faucon (WSJ).
Photo: The Wall Street Journal.
Photo: The Wall Street Journal.
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