America is not on the list! Countries that will be most affected if oil prices reach $100

Brent crude futures were last up 0.15 percent to trade at $85.12 a barrel, while US West Texas Intermediate (WTI) crude was up 0.5 percent to $81.11 a barrel.

The surprise output cut by OPEC and its allies has caused oil prices to rebound, and analysts say big oil importers like India, Japan and South Korea will suffer the most if prices hit $100 a barrel, as some predicted.

Last Sunday, OPEC+ announced a production cut of 1.16 million barrels per day, a move that oil markets did not expect.

Pavel Molchanov, managing director of private investment bank Raymond James, said, “It will not be the United States that will suffer the most from $100 oil, but the developed countries without domestic oil resources: Japan, India, Germany, France, to name a few great examples…” spoke.

The countries’ voluntary cuts are scheduled to begin in May and last until the end of 2023. Both Saudi Arabia and Russia will reduce oil production by 500,000 barrels per day by the end of this year.

EYES ARE IN COUNTRIES DEPENDING ON OIL IMPORT

“The regions most affected by the disruption in oil supply and the consequent rise in crude oil prices are those with a high degree of import dependency and a high share of fossil fuels in their primary energy systems,” said Henning Gloystein, director of the Eurasia Group.

“This means that those most exposed are the import-dependent emerging market industries, particularly in South and Southeast Asia, and the heavy import-dependent heavy industries of Japan and South Korea,” Gloystein said. he said.

INDIA

India is the world’s third-largest oil consumer and has been buying Russian oil at a huge discount since sanctions were imposed on Russia in response to its invasion of Ukraine.

India’s crude oil imports rose 8.5 percent in February compared to the same period last year, according to government data.

“Although they are still making a profit from discounted Russian gas, they are already suffering from high coal and gas prices. If oil goes higher, even discounted Russian crude will start to hurt India’s growth.” said.

JAPAN

Oil is the most important energy source in Japan and accounts for about 40 percent of its total energy supply.

“With no significant domestic production, Japan is heavily dependent on imports of crude oil, with 80 to 90 percent coming from the Middle East region,” the International Energy Agency said.

SOUTH KOREA

According to the independent research firm Enerdata, oil is also the main part of its energy needs for South Korea.

“South Korea and Italy are more than 75 percent dependent on imported oil,” Molchanov said. Europe and China are also “highly exposed,” according to Gloystein.

However, Gloystein added that China’s exposure is slightly less due to domestic oil production, while Europe as a whole relies mainly on nuclear, coal and natural gas rather than fossil fuel in its primary energy mix.

IMPACT ON EMERGING ECONOMIES

Molchanov said that some emerging markets that «do not have the foreign exchange capacity to support these fuel imports» will be negatively impacted by the $100 price tag. He named Argentina, Türkiye, South Africa and Pakistan as potential economies to hit.

He said Sri Lanka, which does not produce domestic oil and is 100 percent dependent on imports, is also very vulnerable to a harder blow.

Amrita Sen, founder of Energy Aspects, said, “The countries with the lowest foreign exchange and importers will suffer the most because oil is priced in dollars,” adding that if the dollar appreciates, the cost of imports will increase even more.

$100 PER BARREL WILL NOT BE PERMANENT

However, Molchanov added that while $100 per barrel is on the horizon, the higher price point may not stay for long, adding that this will not be a «permanent plateau».

“In the long run, prices may be closer to where we are today,” Molchanov said. «It’s around $80 to $90,» he said.

“When crude oil reaches $100 a barrel and stays there for a while, that encourages producers to really ramp up production again,” Gloystein said.

Source: CNBC