Algiers (AFP)
The collapse of oil prices makes the situation "critical" for Algeria because of its dependence on oil rent, warns Professor Mourad Preure, an Algerian hydrocarbon specialist and former leader of the public oil group Sonatrach.
For this energy geopolitician, the fall in the price of black gold makes the "most pessimistic" scenarios for the world economy "conceivable".
Q: What impact can we expect from the fall in oil prices on the Algerian economy?
A: "Algeria is excessively exposed to fluctuations in the oil market due to the low diversification of its economy.
The impact will be very strong with hydrocarbon receipts already below needs. In all likelihood, these revenues in 2020 will be in a niche between $ 34 billion, their current level, and more or less $ 20 billion, depending on the possible developments of the crisis.
In any case, the situation is critical. It requires, first of all, a rigorous effort to anticipate threats but also opportunities, because any crisis contains opportunities. "
Q: What are these opportunities and possible solutions for Algeria?
A: "It is clear that the priorities include a powerful acceleration of economic reforms, a deep modernization of governance and an improvement in the business climate.
Algeria, all things considered, has the means, notably financial, and natural comparative advantages, to overcome this crisis.
But it needs an innovative strategy: diversify the economy and move towards the energy transition. "
Q: What are the probabilities that the price collapse will persist, either due to the coronavirus crisis, or the will of certain producers to dictate the rules of the market?
A: "We are facing a real downside shock, even more serious than in 2014.
This shock occurs in an exceptional context. The Chinese economy is undergoing a severe slowdown which is having a devastating effect on the world oil industry.
In this context, where there is an overabundance of supply (of oil) and where demand slows down, the most pessimistic scenarios are possible.
Wider dissemination of the epidemic could even lead to + a collapse + of the world economy. We are in a situation of great unpredictability.
In fact, the "Algiers consensus" which brought together in 2016 the OPEC and non-OPEC countries, led by Russia, did not resist this crisis.
Indeed, the sharing of the sacrifices following a fall in production to support prices is different, given the higher level of vulnerability of Saudi Arabia and of the other members of OPEC compared to Russia, whose economy is more diversified and that can be enough for a barrel at 42.4 dollars (note: Moscow based its 2020 budget forecasts on a barrel of Brent at 42.4 dollars).
The price war recklessly launched by Saudi Arabia, as every time in history, will end again with a weakening of the producing countries. And price levels below $ 30 a barrel can no longer be excluded.
Certainly, we can anticipate a return of Russia to the negotiating table and a slowdown in American production. But the excessively high uncertainties about the evolution of the world economy are directing the markets which tend to over react to crises, leading to a "butterfly effect", towards a chaotic sequence which is likely to be unprecedented in history " .
© 2020 AFP