The Takeaways

1. "$50 dollar oil is not a disaster." Bijan Khajehpour said that though oil trading at $100 or more per barrel had become the norm over the past five years, current prices are relatively high compared to prices over the last 25 years, when oil prices averaged between $20 and $40 per barrel.



2. Although the global price of oil dropped significantly as recently as 2007, the recent plunge is unprecedented because Saudi Arabia and other OPEC members have refused to cut production and instead are simply allowing the market to run its course.



3. The global oil market is cyclical: lower prices lead to higher consumption, which in turn leads to an increase in price. Although it takes time for this pattern to play out, “global demand for oil has increased 11 percent in the past decade” and prices will rise again. What comes down must go up. 



4. In Colombia, peace between the government and FARC rebels “could be a game changer.” However, even in the case of peace, Alfonso Cuéllar believes that local activists will resist efforts to develop new energy sources – particularly shale.



5. According to Jon Rozhon, “low oil prices are a cause for concern” in both the United States and Canada. Although production is up in both countries, the drop in prices will reduce government revenues, force small operators to close, and hurt local economies.



6. In Mexico, where the government was already receiving criticism for its inability to stem violence and corruption, Duncan Wood sees social unrest as likely to increase as low oil prices hurt government revenue and force cuts to social programs and infrastructure projects. The most recent drop in prices will highlight the need for greater coordination and cooperation among Canada, the United States, and Mexico.



7. By allowing prices to fall, Saudi Arabia and other OPEC members are hoping to squeeze out emerging oil providers, and reassert themselves in the global market to maintain market share. OPEC’s share of the market has dropped from 50 percent to 30 percent over the past 25 years.



8. In Russia, "oil production is past peak… new discoveries are very small and…scattered." With prices down and Russia facing greater economic isolation, Mikhail Krutikhin believes that the country is headed into a recession and is on the road to becoming a net energy importer.



9. As for Nigeria, Yinka Omorogbe said that "good governance is the major issue…not oil prices." It is her hope that the drop in the price of oil will push Nigerians to demand more responsible, nationally focused spending from the government.



10. Summarizing, Jan Kalicki noted the risks of reliance on one or two commodities and the imperative of economic diversification to guard against sharp ups and downs in prices; the essential role of transparency and well-governed institutions; and the higher risks that corrupt or autocratic systems face in a lower oil price environment. Energy policy considerations need to be integrated with political, economic and security dimensions of foreign and domestic policies.

Event Description and Agenda

As the price of oil continues to fall, the Wilson Center's Africa Program, Canada Institute, Kennan Institute, Latin American Program, Middle East Program, and its Regional and Global Energy Series convened an expert global panel, assembled from Russia, Colombia, Canada, Iran, and Nigeria, to discuss the economic and political repercussions of depressed energy prices, as well as the effects of the lower prices on competitiveness and investment.

In North America, lower oil prices are likely to impact the unconventional sector in diverse ways, applying pressure to capital expenditure, spurring innovation, and putting pressure on budgets in Canada and in Mexico, which is reforming its energy sector . In Colombia, where oil accounts for some 50 percent of export revenue, falling prices have created a growing budget gap and expectations are that government spending will have to increase dramatically if the current peace talks succeed in ending Latin America’s longest-running guerrilla war. 

For Russia, the question of oil prices, already central to the country’s economy, will take on even greater significance in the context of increasing economic and geopolitical isolation over the conflict in Ukraine. In the Middle East, falling oil prices have affected oil-producing countries in the Persian Gulf, primarily Iran, Iraq, and Saudi Arabia. And in Africa, implications are long-reaching for Nigeria in the context of the country’s continued security challenges and upcoming elections, as well as its geopolitical role.

This event covered an exploration of political, economic, and security implications of tumbling oil prices in various parts of the globe.

Panels:

1:30 - 2:45 : North America and Latin America

Alfonso Cuéllar, President and Managing Director, Hill + Knowlton Strategies, Colombia

Jon Rozhon, President, Oak Leaf Energy Training and Senior Researcher, Canadian Energy Research Institute (CERI), Canada

Duncan Wood, Director, Mexico Institute, Wilson Center

Moderator : David Biette, Director, Canada Institute, Wilson Center

3:00 - 4:15 : Russia, Iran and the Persian Gulf, and Africa

Bijan Khajehpour, Managing Partner, Atieh International, Iran

Mikhail Krutikhin, Partner, RusEnergy, Russia 

Yinka Omorogbe, Nabo Graham Distinguished Professor, Nigerian Institute of Advanced Legal Studies, Nigeria

Moderator : Matthew Rojansky, Director, Kennan Institute, Wilson Center