Oil expert Matteo Ozano believes that some oil-dependent regimes such as Algeria, Iraq and Iran may be in danger and could have catastrophic consequences, according to a report in the French newspaper, Le Nouvel Observator, by writer Sarah Dhaifallah.
The writer Sarah Deif Allah said that for the first time in its history, American crude oil prices collapsed last Monday, reaching zero, in the range of about minus $ 37.63 a barrel (it reached minus $ 38). The price of a barrel had reached about sixty dollars at the beginning of this year, but it soon declined.
She added that the collapse of demand - due to the Coronavirus and the diminishing capacity of oil storage - together constituted the factor that explains this massive drop in crude prices, and asked, in light of this, the geopolitical consequences of this rapid price drop on the oil-exporting countries.
And on the economic risks that may result from many oil-exporting countries having thousands of barrels, whose storage requires a high cost, expert Matteo Ozano said that the entire world is losing huge money and that all major producers have reached levels below the expected budget break-even price, according to what Conveys the Observator Report.
The most affected
Iran, Iraq, Venezuela and Algeria are among the countries hardest hit by the drop in oil prices, because in some cases, oil is almost the only supplier they have, and for this reason, we should pay close attention to what is happening in these countries, especially in Algeria, the newspaper says.
And on the question posed by the French newspaper about whether such a situation had previously occurred in the past, the expert in the field of oil explained that the only precedent comparable was the incident of oil abundance in the eighties, where it witnessed a sharp decline in oil prices, which reached ten dollars in 1986.
After the October war and the first oil shock, then the Iranian revolution and the second oil shock, a recession led to a great abundance of oil in the global market, and as a result, it undermined the resources of the oil states of a large number of producing countries, and this caused heavy geopolitical consequences.
In this context, two events come to mind, namely the collapse of the Soviet Union and the civil war in Algeria in the nineties of the last century, according to the same source.
One of the main factors in the collapse of the Soviet economy was due to the abundance of oil in the 1980s, the period during which oil drying, which is the only source of foreign currency, occurred due to the collapse of the price of a barrel starting in 1985, according to the oil expert.
The same is true for Algeria - the same source continues - where the economic factor was one of the causes of the regime crisis that led to the civil war in the nineties. Overnight, it became impossible to finance the massive investments and development plans drawn up by the generals, and it was no longer possible to purchase the social ladder, the same problem that is occurring again at the present time.
History repeats itself
On what happened during the years of oil abundance in the 1980s, the expert replied that in the middle of the Cold War, slowed growth led to a surplus in oil markets, and was reinforced by a deliberate strategic geographic game from the US State Department at the time, as the Reagan administration encouraged the Saudis to increase production to the maximum Its borders, and dumping the market, to aggravate the collapse of oil prices, and this has caused a lot of damage to the American industry, at the same time that the Afghan war destroyed the Soviet budget.
Regarding the impact of the current situation on geopolitical instability, oil expert Matteo Ozano notes that the Middle East is in a potentially explosive situation, and it is clear that a drop in the price of a barrel will increase the possibility of tension in this region, at a time when Iran ignores the provocations of US President Donald Trump.
The oil expert believes that Iran may close the Strait of Hormuz under the influence of economic sanctions and the consequences of the Coronavirus, which could lead to cutting the global economy’s artery.
Resisting the crisis
And about those who can better resist this crisis, the oil expert expressed his belief that the Saudis can show better resistance than others because the cost of production is very low and they have large foreign exchange reserves.
Russia - which suffered from low oil prices in 2015 - is on the alert for this war, as strategists in the Kremlin learned a lesson from what happened in the Soviet Union in the 1980s, so when they fought the oil price war in early March they were ready for it, They rejected Saudi Arabia's request to curb production brakes, the oil expert says.
Matteo Ozano pointed out that the Russians have accumulated large foreign exchange reserves since 2015, not to mention that the depreciation of the local currency "ruble" helped them to confront the dollar shortage.
He pointed out that the Russians intend to take advantage of this collapse in demand, to overcome the obstacle represented by shale oil producers in the United States.
Disturbance of oil-producing countries
As for the possibility of a rapid rise in prices that could avoid disasters in producing countries, Matteo Ozano said, "We know when we will fall into a crisis, but we do not know when to get out of it, and it is unlikely that the demand for oil will return quickly to pre-crisis levels, because the return of air traffic and tourism You will be gradual. "
"We will live in a period in which the prices of crude oil may decrease, and with the exception of Saudi Arabia and Russia, the producing countries will clearly enter into a state of extreme turmoil. For example, Iran, Algeria, Mexico, Venezuela and Azerbaijan will see a huge deficit in their budget, and I am not talking about oil-producing countries." In the Gulf of Guinea, like Nigeria. "
The expert pointed out that even if the price of a barrel rises, many countries such as Algeria will still face a decline in crude oil production, noting that even with high prices, this will not solve the problem radically.
The expert pointed out that the Algerian national company, "Sonatrach", whose production fell to a quarter in ten years, is witnessing a structural deterioration, and Algerians are aware of what this means for the sustainability of the existing political system and its ability to remain in power.
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