Cheap oil could wreak havoc in Venezuela, Russia, and Iran — but the U.S. isn't immune

Global oil prices hit a new six-year low on Monday, with the international benchmark, Brent crude, settling at $42.69 a barrel, its lowest close since March 2009. A year ago, Brent crude was selling at about $103 a barrel. U.S. West Texas Intermediary crude closed at $38.24 a barrel, its lowest settlement since February 2009. The reason is China, which has driven the rise in global demand for oil but now appears headed for some sort of slowdown.

"New anxieties about frailties in China," says The New York Times, have raised fears that the price of oil "could remain depressed far longer than even the most pessimistic projections, and do even deeper damage to oil exporters." For consumers of gas and other petroleum products, that probably doesn't sound so bad. But the U.S. oil boom will take a hit, too, and weaker economies abroad will hurt U.S. exports.

For countries like Venezuela, Nigeria, Algeria, and Iraq that depend on oil revenue to finance their government, cheap oil is already causing domestic unrest and economic turmoil. Oil producers with significant reserves of foreign currency can fend off the pain for longer, says David Goldwyn, a former U.S. special envoy for energy affairs. "The countries which need to sustain investment to maintain political legitimacy need to be worried, and that's Brazil, Russia, and even Iran," he tells The New York Times.

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Even Saudi Arabia — which started a race to flood global markets with cheap oil last November, in a bid to capture market share, The Wall Street Journal reports — is at risk of falling prey to its own strategy, assuming Chinese demand doesn't pick back up. With the growing Saudi population, “the expensive social contract between the royal family and Saudi citizens will get more difficult, and eventually impossible, to sustain if oil prices do not recover," says Meghan O'Sullivan at Harvard's Geopolitics of Energy program.

Jim Krane at Rice's Baker Institute notes that Saudi Arabia still has a $664 billion cushion, protecting its ruling family for a while. "In terms of oil busts, it's still early days," he tells The Wall Street Journal. But if the low prices continue, the U.S. and its geopolitical friends and foes alike will face varying degrees of discomfort, with unpredictable, not entirely positive consequences.