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In the U.S., lower oil prices mean falling gas prices, which is a cause to rejoice. For many other parts of the world, oil’s collapse to five-year lows isn’t something to celebrate. Instead, it could be a reason to take to the streets.
Crude prices were lower Tuesday after OPEC repeated its refusal on Monday to cut oil output despite fears of a looming glut and a UAE official rebuffed calls for an emergency meeting to fix prices. The recent stance marks an about-face from the cartel's decades-old policy of tightening supplies to support prices.
Since peaking at just over $100 a barrel this summer, prices have fallen by more than 40 percent, including a slide last week that wiped out about $8, or more than 10 percent.
Oil consumers, from motorists at the gas pumps to energy-hungry economies such as those of China and the United States, are enjoying the windfall of cheaper crude. Producers, on the other hand, are bracing for a sudden, sharp loss of tens of billions in revenues.
"Continued price declines would for some countries and companies make an already difficult situation even worse," according to the Paris-based International Energy Agency, in its latest monthly report. "The resulting downward price pressure would raise the risk of social instability or financial difficulties if producers found it difficult to pay back debt."
"Continued price declines would for some countries and companies make an already difficult situation even worse."
The IEA singled out Russia and Venezuela among major oil exporters facing the biggest risk of political and social fallout.
In Venezuela, vast oil reserves generate half of the government's revenues and helped subsidize generous social programs that now are at risk of prolonged, painful cutbacks if the prices of oil remains low.
Earlier this year, to cope with widespread shortages of consumer goods, the government allowed the local currency to fall sharply in hopes of attracting the foreign currency needed to import medicine, food and other imports. The government has only a small cushion of foreign reserves to help blunt the impact of the latest loss of oil revenues.
In Russia, the economy was already reeling from a series of economic sanctions imposed by the United States and Europe Union in response to Moscow's invasion of Ukraine. Those measures sparked a massive capital exodus that helped prompt the Russian central bank to sharply hike interest rates overnight.
Despite intervention to try to stabilize exchange rates, the ruble has lost half its value in the past year and inflation has jumped to 9 percent, inflicting pain on Russian consumers. It was down 10 percent against the dollar on Tuesday morning, after a steep fall on Monday.
Russia still has sizable reserves of more than $400 billion, but recently abandoned efforts to use that cash to defend the ruble.
The slowdown in Russia is also taking a toll on neighboring Kazakhstan, which is also heavily dependent on oil revenues for 60 percent of the state's budget and 33 percent of GDP, according to analysts at Austin,Texas-based Statfor, a global intelligence and advisory firm. The local currency has also been devalued, inflation is rising and gasoline is in short supply, the firm said in a recent report.
For the rest of the world's oil-producing countries, a continued slide in crude prices won't be pretty. But there are a number of variables that will determine which major oil exporters can ride out the storm of the oil price crash without social or political upheaval.
For starters, the lower price is hitting some producers harder than others. A lot depends on the base cost of producing each barrel of oil; countries with a relatively low break-even point are better insulated than those with higher production costs.
Some oil producers are much more reliant on oil revenues than others. But even among those that rely heavily on crude to pay the bills, the outlook varies widely.
One reason is that some oil producers have set aside bigger cash cushions than others. Many OPEC producers, among the world's largest exporters, have built up sizable reserves. Among the world's largest exporters, OPEC producers Saudi Arabia, the United Arab Emirates and Kuwait are heavily exposed to losses in dollar terms.
But between them, they're holding more than $2 trillion in their sovereign wealth funds.
"They have ample reserves," said Reva Bhalla, head of global analysis at Stratfor. "And they have much better mechanisms to cope with any unrest at home."
That capacity to impose and maintain social order also varies widely, regardless of where oil prices are headed. Some oil-dependent countries, including Iraq and Libya, are already experiencing civil conflict, so any potential for unrest is already being felt.
Short of outright civil upheaval, falling oil prices present political strains on any government facing a surprise, sharp budget gap. In Nigeria, where oil and natural gas account for about a third of Nigeria's GDP and 80 percent of government revenue, President Goodluck Jonathan faces the added challenge of looming presidential, state and local elections in February.
Other, smaller African countries are coping with a sharp drop in oil revenues. But those losses may attract little notice from the general public, largely because the public never shared in the oil wealth in the first place.
"In countries like Equatorial Guinea, a lot of it's still getting funneled into the government political patronage network, who are the relatively rich elite. So it's not trickling down to social programs," said Matthew Bey, an energy analyst at Stratfor. "But it might have an impact on which general you have to buy off."