Seven years ago oil was selling for just under $13 a barrel, and its producers were counting their blessings. Then the Iranian revolution and panic buying led to a near-tripling of oil prices, and producing countries went on a borrowing spree to finance ambitious development projects. For collateral they had oil reserves that both they and their creditors knew could only increase in value. But now the oil glut that has been building for years has brought sudden new chaos to the market, pushing prices down to $20 a barrel and less. Many will benefit from this fall, even as some pay dearly.
Mexico will be one of the biggest losers. This year the scheduled interest payments alone on its $97-billion foreign debt come to $11 billion. That is an obligation beyond Mexico's capacity. Its currency reserves have shrunk drastically, and concern is mounting that some interest payments will be missed. Mexico needs billions in new loans. A U.S.-led bail-out effort is almost inevitable, but how soon that will come and how effective it might be are uncertain.
What is misfortune for Mexico is manna for Brazil, Latin America's largest oil importer and biggest debtor. Every $1 drop in the price of oil saves Brazil $150 million a year. There are other big winners--among them the airlines, which can expect to save $110 million annually for each 1-cent-a-gallon drop in the cost of aviation fuel.