Oil importing countries face rising oil bills

This month’s crude oil price was recorded at $128 per barrel and sources claim that this is mainly due to the lingering ban on Iranian-produced oil.  This figure is just $20 below the 2008 record high and is 15 percent higher than January figures.

Faith Birol, chief economist of the International Energy Agency (IEA) vented that “For the first time the world will pay $2 trillion on oil import bills”.

The chief economist stated further that oil importing countries already paid about $1.8 Tn USD throughout 2011 and another $1.7 Tn USD during 2008 – proof that the world’s oil bills have gone up significantly.

Assuming that trends in oil prices per barrel remain close to $125 and $107 for Brent and U.S. crude respectively, the chief economist projects that resulting cost of oil imports would make up 3.4 percent of gross domestic product or, about 3 percentage points above last year’s cost.

On a regional scale, Birol claims that the European Union would stand to suffer the most from soaring oil import bills.  He informed that since oil import bills are paid in U.S. dollars, a weak euro currency versus a stronger US dollar will consequently raise the region’s oil import payables.  The euro has actually deteriorated to $1.33 from the May 2011 level of $1.49.

Last year, EU has paid up to $470 billion in oil imports and based on present oil prices, the EU is expected to cough out $500 billion this 2012.  Additionally, EU’s gas payables reached $120 billion, up by $20 billion compared to last year’s payables.

The 2012 election year in the U.S. would have impact not only in U.S investments but more so  on oil bills as economists project it to climb to $426 billion, substantially higher than the $380 billion amount paid by the U.S. in 2011.

Countries like China is likewise not spared of increased oil import bills.  Last year, it released $50 billion to pay for oil imports.  This year however, it will have to increase its budget to pay off a $250 billion oil bill.

Meantime, Japan and India will also experience increases in oil bills and will have to pay off $119 billion and $118 billion respectively for 2012.

Unfortunately, a higher oil bill may push China to temper its economic activities including oil investment and this would have a negative effect on a global scale.  Birol reminded that China has helped save nations from recession four years ago.  Global economic setbacks might recur if China experiences a slack in its economy.