How to Handle an Oil Shock
The global oil market is a volatile place, and the fate of countries that have treated adverse shocks as temporary and reversible, and were then proven wrong, has seldom been encouraging. Gulf producers, by going on a borrowing binge, could be setting themselves up for future pain.
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CAMBRIDGE – The global oil market is a volatile place. But, abstracting from high-frequency fluctuations, average annual world prices (in US dollars) plummeted about 60% between 2012 and 2016. So how do countries like Russia, Saudi Arabia, Iraq, and Venezuela cope with a collapse in the price of their dominant (and in some cases, only) export?