OAPEC meeting this week amid dropping gas prices

The Organization of Arab Petroleum Exporting Countries (OAPEC) is meeting for a three-day summit in the United Arab Emirates this week. OAPEC is similar to the larger oil cartel, OPEC, but is made up of only Arab countries.

The meeting comes amid weeks of falling gas prices. Saudi Arabia, the largest petroleum exporter says it won’t cut output to prop oil prices, even if non-OPEC countries do so. Part of Riyadh’s decision to ride out the slump is an attempt to wield regional power. With enough cash reserves and low production costs, the move won’t affect the gulf nation the same way it will hit places like Iraq, Iran, Russia or Venezuela.

On a single day last week, Dubai’s stock market dropped by nearly 8 percent, its largest one-day decline in six years. Analysts say financial markets are overreacting, saying oil prices will return to a high point within six months. Oil has traditionally been a uniquely volatile commodity, one often affected by global political developments.

During Al Jazeera America’s Sunday night segment, “The Week Ahead,” Richelle Carey spoke to Steven Kopits, managing director of Princeton Energy Advisors; and to Max Fraad-Wolff, chief economist at Manhattan Venture Partners.

Fraad-Wolff says, “we are seeing a meaningful global redistribution of wealth to the tune of tens of billions of dollars a day, with wealth being distributed away from producers to consumers.

Kopits say that advanced country consumers such as the United States, Japan, and European nations, will be the primary beneficiaries. He added, though, that US shale producers will likely suffer for a while; and that the companies that could suffer substantially are oil giants like Shell and Chevron.

He also says that the countries who are likely to benefit the most in this situation are Portugal, Ireland, Greece, and Spain. They take in a high percentage of oil imports will likely rebound in a big way this year.

Russia, on the other hand, is being adversely affected by the drop in gas prices. It’s one of the three biggest oil producers in the world, and its economy is heavily dependent on oil production. Around 68 percent of Russia’s foreign export revenues come from energy and around half of its federal budget is made up of taxes brought in from energy exports.

The US and other Western nations are using the situation as an opportunity to pressure Moscow over its involvement in the Ukraine crisis that’s been ongoing since February.

“The question for the Russians is, can they survive the short-term pain escalating fast from political, geopolitical, and military situations to get to the long-term benefits,” says Fradd-Wolff.

Kopits says he expects the status quo for a while on Ukraine, which means Russia will probably face another six months of serious financially hardship, including repercussions from sanctions.