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A rebalancing of the petrodollar is starting

As the latest multi-year rally in oil prices ends, a massive rebalancing of petrodollar is about to begin

Any price bounce in 2015 - spurred, say, by the kind of deep cuts in production that Opec introduced in 2008 - would leave Petroleum Economist’s annual petrodollar graphic looking as uneven as it has for the past few years.  For now, it still shows the huge money transfer, from consumer to producer countries, which has characterised the past three years, when oil prices have averaged $111 a barrel. 

Even when the data next year catches up with the oil-price slump in the second half of 2014, the shape of the graphic will look similar. Despite the 40% plunge since June, Brent’s average price for the year up to the end of November was about $101/b.

Triple-digit oil has been painful for consumers. Yes, the remarkable rise in American oil output between 2011 and 2013 has been good for the country’s balance sheet, shrinking its import need from 11 million barrels a day (b/d) to 8.8m b/d. But the world’s biggest consumer still spent more than $1 trillion on oil imports. Saudi Arabia, in those three years, earned almost the same amount from selling oil.

If the price plunge turns into a multi-year trough, Petroleum Economist’s graph will gradually rebalance. Three years of $50 oil would more than halve the size of the black bars on the left, and shrink the red bars to the right by the same amount.

The grey GDP bars would change, too. Several oil-exporting economies -- starting with Russia and Venezuela - could fall into recession next year. Others may follow, even while cheaper oil boosts household spending power and GDP in consumer countries. 

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