A surprise decision by OPEC and its OPEC+ allies to cut oil production sent oil prices soaring, with analysts saying importers such as India, Japan and South Korea would feel the biggest impact if prices hit $100 a barrel, as some expect experts, CNBC reports.

On Sunday, OPEC+ announced a production cut of 1.16 million barrels per day, which oil markets did not expect.

“This is a tax on every economy that imports oil. It’s not the US that will feel the biggest pain from a $100 oil price, but countries that have no domestic oil resources: Japan, India, Germany, France… to name some of the big examples,” said the CEO of a private investment firm. Raymond James Bank Pavlo Molchanov.

Voluntary production cuts by the countries of the oil cartel will begin in May and last until the end of 2023.

Both Saudi Arabia and Russia will cut oil production by 500,000 barrels per day by the end of this year, while other OPEC members such as Kuwait, Oman, Iraq, Algeria and Kazakhstan will also cut production.

Brent crude futures traded around $85.41 a barrel on Thursday, while U.S. West Texas Intermediate crude futures traded at $81.11 a barrel.

Countries that are heavily dependent on oil imports

“The regions most affected by the reduction in oil supplies and the associated increase in crude oil prices are those with a high degree of dependence on imports and a high share of fossil fuels in their primary energy systems,” said Eurasia Group director Henning. Gloystein.

This means that import-dependent industries in emerging markets, especially in South and Southeast Asia, as well as import-dependent heavy industries in Japan and South Korea, are most vulnerable, he added.

India

India is the world’s third-largest oil consumer and has been buying Russian oil at a deep discount since sanctions were imposed on Russia in response to its invasion of Ukraine.

India’s crude oil imports rose 8.5% in February compared to the same period last year, according to government data.

“While they continue to benefit from lower Russian gas prices, they are already affected by high coal and gas prices. If the price of oil continues to rise, even a decline in the price of Russian oil will start to affect India’s growth,” Glostein said.

Japan

Oil is the most important source of energy for Japan, and it accounts for about 40% of the total volume of energy carriers.

“With no significant domestic production, Japan is highly dependent on crude oil imports, with 80% to 90% coming from the Middle East region,” the International Energy Agency said.

South Korea

According to independent research firm Enerdata, most of South Korea’s energy needs are met by oil.

“South Korea and Italy are more than 75% dependent on imported oil,” Molchanov emphasized.

According to Glostein, Europe and China are also “very vulnerable”.

However, he added that China’s influence was somewhat lower due to domestic oil production, while Europe as a whole relies mainly on nuclear power, coal and natural gas, rather than fossil fuels as its main energy source.

Impact on developing economies

According to Molchanov, some emerging markets “do not have the foreign exchange capacity to support these fuel imports” and will be negatively affected by the $100 price.

He named Argentina, Turkey, South Africa and Pakistan among the economies that could be affected.

Sri Lanka, which produces no oil domestically and is 100 percent dependent on imports, is also highly susceptible to a worse hit, he said.

“Countries with the weakest currencies and which are importers will suffer the most because the price of oil is in US dollars,” said Energy Aspects founder Amrita Sen, who added that the cost of imports would increase even more if the US dollar appreciates. .

Prices of $100 per barrel will not be permanent

However, while $100 a barrel may be on the horizon, it is unlikely to stay at that level for long, Molchanov said, adding that it will not be a “permanent plateau.”

“Longer term, prices could be more in line with where we are today” — in the $80-$90 range, he said.

He believes that once the price of crude oil reaches $100 per barrel and stays at that level for a short period of time, it will encourage producers to increase production again.