Which oil-producing countries face the greatest risks of civil unrest as low crude prices strain national budgets?
Verisk Maplecroft, Bath, UK, suggests answers in a study entitled Political Risk Outlook 2016, published Jan. 6.
"The public finances of major commodity-producing countries are set to remain under intense strain in 2016, in many cases forcing unpopular fiscal tightening measures which will increase the risk of societal unrest," the study says.
With oil prices expected to stay below $60/bbl this year, authoritarian regimes in several producing nations will have trouble maintaining the balance of populist spending and repression essential to domestic peace.
Expatriate operations in unstable countries could face disruption from "demonstrations and mass mobilization," the study warns.
To assess the risk of frustration becoming disruption, the study plots oil prices at which a country's budget balances against a "measure of the latent risk of protest and conflict" that Verisk Maplecroft calls its Civil Unrest Index (CUI). A CUI of 1 indicates highest risk, and 7 is lowest.
The study treats Iraq and Libya, both recently embroiled in civil war, as outliers.
Among the other producing countries, Nigeria has the highest risk, with a CUI between 2 and 3 and an oil price needed to balance national accounts of $100-120/bbl. Venezuela requires a slightly higher oil price but scores slightly better on risk of unrest with a CUI of 3-4. Iran and Algeria have CUIs in the same rocky range as Venezuela but lower budget-balancing oil prices: $80-100/bbl.
Russia, Saudi Arabia, and Oman also have fiscal break-even prices of $80-100/bbl but higher CUIs: 4-5 for Saudi Arabia and Russia and 6 for Oman, best in the group.
The two other producers on Verisk Maplecroft's scorecard, Qatar and the United Arab Emirates, need the oil price to be $60-80/bbl to balance accounts and, like Oman, have CUIs on the lower-risk segment of the scale at 5-6.
Point of perspective: Some of these countries were considered unstable when crude prices exceeded $100/bbl.