LONDON -- With crude prices expected to remain low for some time, oil-producing nations and economies that benefited from their wealth are being forced to tackle painful reforms to reduce their reliance on the resource.
Winners and losers
Benchmark New York crude oil futures are hovering around $36 a barrel -- roughly a seven-year low, and one-fourth of the record high reached in 2008. Sustained low prices have hit the Russian and other oil-reliant economies hard, spreading ripple effects through wide-ranging industries.
Wealthy customers from the Middle East, China and Russia had been regular patrons at jewelers and others in London's luxury shopping district, New Bond Street. But Russian turnout has been dropping off as oil prices have slipped, and retailers are steeling themselves for a decrease in Middle Eastern visitors as well.
Russian President Vladimir Putin has acknowledged the necessity of an economic overhaul: "By changing nothing, we will simply run out of reserves and the economic growth rates will linger around zero," he said in an address to the Federal Assembly on Dec. 3.
And the U.K. did not need Putin's speech to realize the implications for its foreign-investment-driven economy as it saw Russian funds -- a source of easy money -- dry up.
Some Japanese trading houses and resource-sector companies have also been hit. Resource-linked stocks were shaken on world markets last week. But this is an inevitable side effect as economies driven by easy profit revert back to their normal state.
Yet low oil prices are also a boon for the ordinary consumer. The average price of a liter of regular gasoline in Japan dipped below 130 yen ($1.06) at the end of November, and has fallen further since then. Pharmaceuticals, food products and other goods containing oil-derived elements have also become more affordable. Even governments on the national and local level have felt some relief: For Japan, a major oil importer, falling commodity prices are like tax cuts that do not cost the government anything.
Changing with the times
Japanese consumers are also well-acquainted with the other side of the commodity cycle: a coordinated price hike by OPEC in 1973 quadrupled the cost of oil to around $15 per barrel, sending general prices into a wild upward spiral.
Yet the economy has become more resilient in the more than 40 years since then, and OPEC has largely lost its ability to control oil prices and volume as a cartel. That fact was thrown into high relief when the group declined to cut production at their early-December meeting despite deepening oversupply. Even if OPEC had moved to limit output, the decision would not have held much weight: non-members now control more than half the global oil market. Prices thus look to remain low for a while.
Some fear that tight finances caused by the stagnant market could spell potential political instability for the Middle East. Yet oil production is not the only trick countries there have up their sleeves.
Take Fujairah, one of the seven United Arab Emirates. The area has no oil of its own. But its port on the Gulf of Oman, near the Strait of Hormuz and mouth of the Persian Gulf, has made it an important player in the energy sector since the facility's 1983 opening.
The emirate's location is ideal for oil shipping. A 380km pipeline bringing crude from onshore fields in Abu Dhabi, which opened in 2012, has only added to the area's appeal. Tankers there take on petroleum for shipment to India, Southeast Asia, Africa, the Mediterranean and elsewhere. Fujairah has thus staked its official strategy on activity at the middle of the oil supply chain, or storage and shipping of crude.
The shipping hub made itself necessary by connecting buyers with producers at ample oil fields. The goal is to create an economy that is shielded from price fluctuations and operates transparently. Pressure to remain competitive through similar structural shifts is mounting in Russia and elsewhere.