Oil crash has economic benefits but geopolitical risks for US

NEW YORK: The oil price crash is mostly a godsend for the United States, delivering American consumers and businesses cheaper gasoline prices while hobbling the economies of adversaries like Russia. But analysts say that the longer the oil price stays so low, the greater the chances it will generate new geopolitical problems that Washington would not like to see. Even if the 70 percent plunge in crude prices has battered the homegrown US oil industry, overall its economy benefits: it remains a net importer of oil and as the price of crude falls, the country’s trade imbalance improves. “There’s no question that low oil prices are very good for the US. Painful for some people obviously, but for the US economy and US consumers a very good thing,” said Bruce Everett, a former ExxonMobil official and professor at Tufts University.

There are apparent strategic benefits of cheap oil, too. Countries like Russia, Venezuela and Iran, with which Washington shares chilly relations, are overly dependent on oil exports and their economies have been heavily battered by the downturn.

“If you don’t care especially about the (other) oil producers, it’s a plus,” said George Perry of Brookings Institution. But the flip side is that strains from a loss of oil income can trigger destabilizing behavior as well.

Energy specialist Jan Kalicki of the Wilson Center posed the question of whether Russia would be less or more troublesome on the world scene if the economic climate worsens.

“The pressure is on Russia from oil prices and their general economic decline,” Kalicki said. “You could make an argument that the Russians have been influenced to some extent by that in taking stronger steps internationally... in Ukraine or in Syria for example. That, he said, serves to “take domestic attention away from the economic problems that it is facing.”

Convergence of interests For Iran, the price fall comes as the country is being permitted to resume a high-level of oil exports with the lifting of international nuclear sanctions on the country. The net effect, income-wise, is little significant immediate gain for the country, according to Anthony Cordesman, a Middle East and security expert at the Center for Strategic and International Studies in Washington.

Even at a price of $40 a barrel-some 15 percent higher than now-the resumption of oil exports won’t have a big economic effect for the country of 84 million people.—AFP