Asia
China’s economy grew by 6.9 percent in 2015, the country’s slowest rate in 25 years, raising concerns about global economic strength and contributing to the oil price decline. Still, China’s economy is hardly collapsing. The International Energy Agency predicts oil consumption in China will grow 3.4 percent this year, down from 6 percent in 2015. With a growing emphasis on the services sector, China should see less oil demand from heavy industry and construction. That is likely to be offset by growing car ownership and more demand for petrochemicals. China is the world’s fifth-biggest oil producer, but financially strapped state-owned oil companies are likely to cut production. For most of Asia, plunging oil prices have alleviated heavy costs for imported oil and gas. For exporting nations, low oil helps and hurts. Auto exports to countries such as the U.S. are profitable. But countries such as Brazil and Russia are tightening their belts after splurging on consumer goods from Asia when commodity prices soared. In Japan, consumers are paying less for energy, but lower energy prices are hindering the government’s battle against deflation.
Europe
Low oil prices are a boost to the European economy, which is a net importer of oil and gas. It helps consumers in two ways: by making fuel cheaper and lowering the cost of making goods. That lower cost feeds through to help bring down consumer prices in shops. Analysts at Capital Economics say lower oil prices boosted GDP in the 19-country union by about 1 percentage point last year. That’s significant, considering the European Central Bank forecasts the eurozone economy grew 1.5 percent in 2015. However, the low prices hinder the European Central Bank’s effort to get inflation back up to around 2 percent. Some fear that a prolonged period of low inflation can encourage consumers to put off spending in the knowledge that goods won’t get more expensive.
Russia
Russia’s economy shrank by 3.7 percent last year, its worst contraction since 2009. Oil and gas together contribute about half of state revenues. The government now anticipates cuts to the budget for fiscal 2016, which is based on an oil price of $50 per barrel. Poorer Russians are already feeling the squeeze from falling wages and last year’s rapid rise in food prices, driven by Russia’s “anti-sanctions” ban on Western food. There is government talk of partly privatizing state companies, but powerful state corporation bosses likely would object. Meanwhile, costly plans to drill in the Arctic, once a source of pride for the Russian government, are on ice. Even so, Russian oil production hit a post-Soviet high of 11.1 million barrels a day in 2015, according to the International Energy Agency, which expects production to tail off somewhat as 2016 proceeds.
Latin America
Across Latin America, drilling projects are being shelved and governments are slashing spending. The IMF is predicting a second straight annual contraction in the region’s economies. The last time growth was negative for two straight years was in the debt crisis of the 1980s, which was partly fueled by an oil bust. Venezuela is the nation hardest hit. The government earns 95 percent of its export income from oil — and its economy was already unraveling before the plunge in oil prices. Long lines for food and other scarce goods are commonplace. In Colombia, oil income is expected to be practically nil in 2016. For smaller countries in Central America and the Caribbean that import oil, the lower prices are a relief.