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Tags: Mideast | oil | turmoil | prices

CNN Money: Lower Oil Prices Could Mean Turmoil

By    |   Friday, 19 July 2013 01:35 PM EDT

Falling oil prices could deliver benefits in the U.S., but analysts worry it could also mean turmoil in some of the oil-producing nations, says CNN Money.

A short-term drop in oil prices is one thing, but long-term declines, which some believe are possible, could be quite another.

Many nations' demand for OPEC oil has weakened. China's energy-intensive economy is believed to be cooling off and its industrial focus is shifting away from heavy petroleum usage.

The U.S. is also importing less oil. Experts point to reasons such as the nation's ability to fulfill a larger portion of its own demand and an American appetite that dwindled during the recession.

According to the Washington Post's Wonkblog, the Energy Information Administration projects that U.S. imports of crude oil and other petroleum products will drop to 6 million barrels per day by 2014. 

Not only is that the lowest level since 1987, it is also a 60 percent drop since 2005.  Wonkblog says lower import volumes don't guarantee lower prices and protection from oil shocks. But it certainly suggests that suppliers will be selling a lot less oil. 

Oil money currently has a pacifying effect in many nations around the globe. Cutting into those revenues could be like chipping away at the foundation of stability, which in many cases is already fragile, some analysts warn. 

Saudi Arabia serves as a prime example, says CNN Money. Since the Arab Spring, the Saudis have used hundreds of billions in oil revenues to subsidize an array of living costs, including housing and health care. 

Oil falling below $100 per barrel presents the risk of social spending cuts. That could be a serious cause for concern in a nation with extremists and a segment of the population already wanting reform. 

Having been subject to sanctions for many years, Iran is suspected to be spending more than its earning from its oil sales. 

"In Iran, [low oil prices] could be a factor in regime change," Steffen Hertog, an assistant professor of Middle East policy and economy at the London School of Economics, told CNN Money. "It could certainly instigate a wave of popular unrest."   

"It's not in the U.S. interest to have a more unstable Middle East, even if we are importing no oil from that region," said Meghan O'Sullivan, a professor at Harvard's John F. Kennedy School of Government who specializes in Mideast petro-politics.

"Many people do worry about revolution. The leaders certainly worry about that," David Pumphrey, co-director of the energy and national security program at the Center for Strategic and International Studies, told CNN Money.

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StreetTalk
Falling oil prices could deliver benefits in the U.S., but analysts worry it could also mean turmoil in some of the oil-producing nations, says CNN Money.
Mideast,oil,turmoil,prices
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2013-35-19
Friday, 19 July 2013 01:35 PM
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