The economic downturn that will emerge from the fast declining oil prices has been predicted to have severe consequences for countries such as Nigeria and Venezuela that lack visionary leadership, experts said.
The failure of the Organisation of Petroleum Exporting Countries (OPEC) oil cartel to stabilise price further complicates the scenario they said.
The UK Telegraph in a recent report quoted the Bank of America as saying that OPEC no longer exists in any meaningful sense and crude prices would slump to $50 a barrel, over the coming months as market forces shake out the weakest producers.
Revolutionary changes sweeping the world’s energy industry will drive down the price of liquefied natural gas (LNG), creating a “multi-year” glut and a much cheaper source of gas for Europe, the Bank of America has warned.
Francisco Blanch, the bank’s commodity chief, said OPEC was effectively dissolved after it failed to stabilise prices at its last meeting. “The consequences are profound and long-lasting.
“The free market will now set the global cost of oil, leading to a new era of wild price swings and disorderly trading that benefit only the Mid-East petro-states with deepest pockets such as Saudi Arabia.
“If so, the weaker peripheral members such as Venezuela and Nigeria are being thrown to the wolves,” the report stated.
The bank said in its year-end report that at least 15pc of US shale producers were losing money at current prices, and more than half would be under water if US crude falls below $55. The high-cost producers in the Permian basin would be the first to “feel the pain” and may soon have to cut back on production.
The claims pit Bank of America against its arch-rival Citigroup, which insists that the US shale industrial was far more resilient than widely supposed, with marginal costs for existing rigs nearer $40, and much of its output hedged on the futures markets.