Although Saudi Arabia and several of the Gulf states are also major oil exporters, they differ from other producers in two important ways. First, their cost of extracting oil is extremely low, which means that they will be able to produce profitably at the current price \u201d\u201c or even at a much lower price. Second, their enormous financial reserves allow them to finance their domestic and international activities for an extended period of time, as they seek to transform their economies to reduce their dependence on oil revenue.<\/p>\n
A further decline in the price of oil could have major geopolitical repercussions. A price of $60 a barrel would create severe problems for Russia in particular. President Vladimir Putin would no longer be able to maintain the transfer programs that currently sustain his popular support. There would be similar consequences in Iran and Venezuela.<\/p>\n
It is not clear whether these countries\u2019 current regimes could survive a substantial and sustained future decline in oil prices. By contrast, it is obvious that oil-importing countries would benefit greatly \u201d\u201c as they already are.<\/p>\n