How Are Falling Oil Prices Affecting Latin America?
Global oil prices dropped sharply last month, falling for a record 12 consecutive days. Venezuela has been desperate for a rise in prices as it struggles to keep oil production above one million barrels per day for the first time in decades. Meanwhile, interest in Brazil’s oil resources has spiked, with international oil companies betting on strong investment conditions with a new government coming into office. In Mexico, the sweeping electoral victory of leftist Andrés Manuel López Obrador this year has given most energy sector investors pause, according to reports. What are the forces driving global oil prices, and how are they affecting stakeholders in Latin America and the Caribbean? What is the outlook for oil prices next year, and how are countries and companies in the region planning for 2019 amid fresh political and economic uncertainty?
John Price, managing director of Americas Market Index: “Latin America’s greatest economic threat comes from fracking and other technologies that have turned America’s nimble oil patch into the global swing producer. Without cartel-like coordination, these hungry producers expand capacity every time pricing climbs above $65/barrel, sending it back down to the $45-55 range. Outside of Venezuela, most new Latin American oil capacity requires a steady floor price of $70 to attract investment. Until leaders in Brazil, Mexico, Colombia and Argentina can make their economies more competitive by bringing down taxes, improving infrastructure and simplifying regulations, their promising new oil reserves will stay in the ground. To add insult to injury, the rapid conversion of the United States from a natural gas importer to a massive exporter threatens the gas-driven economies of Trinidad and Tobago and Peru and further dampens enthusiasm for…”Read More
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