Energy

The Breakeven Oil Price for OPEC Nations

In a paper presented at Chatham House, Matthew Hulbert of European Energy Review argues that there is an inherent instability in world oil markets because the OPEC producing countries have failed to diversify their economies but are still dependent on high oil prices to keep their populations in check.

In order to illustrate this, he presents a graph showing the break-even oil price for each OPEC nation. This is the oil price that each country needs in order to maintain the welfare programs their people have come to expect.

The horizontal axis aligns the OPEC nations in the order that they redistribute wealth to the general population. This is generally done through subsidizing prices and maintaining welfare programs. Iran has the largest commitments (and the biggest population) while Qatar has the least. Saudi Arabia is highlighted because it is at the median. The vertical axis represents the price of oil in US dollars from zero to $140 per barrel.

via RealClearEnergy – The Breakeven Oil Price for OPEC Nations.

Categories: Energy, Transportation