October 13, 2014 10:45AM 

# Falling Oil Prices Put Producers Between a Rock and a Hard Place 

By [Steve H. Hanke](https://www.cato.org/people/steve-h-hanke) 

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Over the last few months, the price of Brent crude oil lost over 20% of its value, [dropping below $90 just yesterday and hitting its lowest level in over two years](http://www.bloomberg.com/news/2014-10-09/brent-crude-approaches-90-on-slowdown-wti-declines.html). In consequence, oil producers will no longer be able to rely on oil revenues to pay their bills. The fiscal break-even price – a metric that determines the price per barrel of oil required for a nation to balance its budget at current levels of production – puts the problem into perspective.

Using data from Bloomberg and Deutsche Bank, I prepared a chart showing the break-even prices for the world’s major oil producers and the price on Brent crude. Over the past six months, Brent crude fell far below the break-even price for eleven of the top oil producers in the world; Iran, Venezuela, Nigeria, and even Saudi Arabia can no longer finance their governments’ largess through oil revenues.

![Media Name: 6_month_brent_v6.jpg](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/6_month_brent_v6.jpg?itok=R3Ko1CdH) 

The combination of [*oil markets flying into a perfect storm* ](http://online.wsj.com/articles/oil-markets-fly-into-a-perfect-storm-heard-on-the-street-1412794051)and excessive government spending puts most of the world’s oil producers between a rock and a hard place, where they will stay [*for some time.*](http://www.ft.com/intl/cms/s/0/583e408c-4d19-11e4-bf60-00144feab7de.html?siteedition=intl#axzz3Ff8DTgvN)

##### Related Tags 

[Energy and Environment](https://www.cato.org/research/energy-environment), [Government and Politics](https://www.cato.org/government-politics) 

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