Oil Price Break-even Points

The Oil and Gas Financial Journal posted an article by Abhishek Deshpande and Nic Brown last April that estimated the fiscal break even points for various OPEC nation. The break even points are based on the government budgets of the nations and represent the minimum price of oil that will allow the government to realize the revenue anticipated in those budgets. These points are as follow for 2014:

Saudi Arabia: $97/barrel
Iran: $126/barrel
Iraq: $103/barrel
Kuwait: $61/barrel
UAE: $88/barrel

It is important to keep in mind these are fiscal break evens not industry break even (or zero profit) points. That is to say that the countries' oil industries can still make a profit at lower prices than these. It is just that they will not make as much profit as anticipated in the government budgets and the government will not have as much revenue as it was planning to spend. Therefore, at oil prices below the fiscal break even point governments must cut spending, spend cash reserves, and/or borrow money to keep going. Because these break even points are driven by the governments plans for spending more than the actual costs of production, they can change dramatically from budget year to budget year. As a result, one has to be careful when talking about these points as they are fuzzy and changeable.