Oil prices remain a cause for concern for the world’s politicians, policymakers, economists, investors, and experts, as the leaders from OPEC prepare for a policy meeting in Vienna on May 25. This is particularly true of leaders in Asia, but in some cases, many Asian nations stand to benefit from lower prices.

Considering Asia’s scenario, net oil importers like China and Japan should benefit from lower oil prices as a result of cheaper input and fuel costs. Energy-hungry India, which imports more than 80% of crude oil for its domestic needs, stands to benefit significantly. The other probable gainers include South Korea, and Thailand.

On the other hand, Brunei and Malaysia—two net oil exporters—may be hit hard by a price collapse.

On global front, net oil exporters, including countries in the Middle East and Russia, should be negatively impacted, because their economies are heavily dependent on oil revenues.

Industry analysts are divided on the outcome of the meeting, but it is widely expected that the OPEC members, who produce nearly 40% of the global oil supply, will agree to extend production cuts at least through the end of 2017 or even later.

Expectations of cut extensions would mean lower prices based on U.S. shale production, which is trending upward. Since the beginning of this year, global oil prices have been hovering around $50 per barrel (bbl). However, compared to a year ago, the current price is still 50% higher, because before recovering in early 2016, oil prices were below US$ 30/bbl, at an all-time low.


Oil prices also directly affect inflation. Cheaper oil means lower overall inflation, and has directly impacts the price of fuel, even as it may affect the prices of other goods. That is why lower oil prices are a welcomed by nations where inflation has been a problem, including India and South Asia.

Most of these nations import commodities and would continue benefiting from declining oil prices in a few years.

Meanwhile, Indian economists are optimistic oil prices will ease, even as a bank report predicts that average crude prices will be around $45/bbl for the next half of 2017. This could bring economic growth to India.
The latest report from State Bank of India, the country’s largest commercial bank, said eased prices would positively affect GDP growth and inflation.

The report said a normal monsoon season, lower current account deficit, accommodating monetary policy, and fiscal discipline—alongside lower crude prices—would support higher GDP in 2017-2018.
The report said past trends have shown a link between low oil prices and high global growth--subsequently domestic growth--significantly.

The report said that , from 2003 to 2006, when average Brent crude was $47/bbl, global average GDP growth was 5% while India’s average was 8.6%.

The report added that in 2017 to date, the average crude price was $54/bbl (maximum $57), and given the current trend in non-OPEC oil production, the bank said it believes crude prices may shortly dip below $45/bbl or even lower.

The report also said U.S. crude production has risen by more than 10% since mid-2016 to 9.3 MMbbl/d, close to the output of top producers like Russia and Saudi Arabia, and is projected to reach 9.9 MMbbl/d in 2018.

It is quite clear oil prices are vital to countries’ economic growth. But it all depends on any particular country’s imports, exports, and production status.

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