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How The Oil Price Slump Affected The Ultra-Rich


Last year, the world’s ultra-rich added a bit more to their combined wealth and now hold a total of US$30 trillion in net assets. The number of individuals owning at least US$30 million in net assets edged up 0.6 percent and the total accumulated wealth inched up 0.8 percent globally, according to the ‘World Ultra Wealth Report 2015-2016’ by Wealth-X.

While the Americas and Asia Pacific saw their respective numbers of ultra high net worth (UHNW) individuals and total wealth grow, the Europe, the Middle East and Africa (EMEA) region showed drops in both the number of super rich people and their combined wealth.

Unsurprisingly, some the richest people fared far better than others, who had to grapple with a year of consistently low oil and commodity prices. Millionaires in some countries heavily dependent on crude exports and commodities trade suffered some losses in this brand new ‘lower-for-longer’ world. So it was not a huge surprise to see that the richest were hit hard in Russia, Norway and Australia: all three big crude and commodity exporters.

In Russia, the number of UHNW people who own at least US$30 million in assets fell by almost 13 percent last year, with the number of those in the Moscow area plunging by a staggering 30 percent. With Russia’s economy in recession for a second year now and lower oil revenues widening the budget gap, the falling number of multi-millionaires is no surprise at all. Russia is tapping into its continuously depleting rainy-day fund to shore up the budget gap. Earlier this month, the government had to tap into the fund for the third time this year alone. According to analysts cited by CNN, the fund would shrink from US$32.2 billion this month to US$15 billion by the end of this year, with the remaining resources fully spent soon after that.

The western sanctions against some banks and foreign funding over the Crimea annexation are not helping Russia’s richest either.

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The government plans to draft nearest-term budgets based on a US$40 price for its Urals blend, which uses the Brent price for pricing. The Brent has been trading at around US$44-US$47 for a few weeks now, and Russia can only hope that prices will go up, or at least not drop much from the current levels.

Russia’s north-westernmost tip borders Norway, which also relies on oil exports revenues. According to government figures, total government net cash flows last year dropped 30 percent on the back of lower revenues with the slump in crude prices. The petroleum sector accounts for 15 percent of Norway’s GDP, 20 percent of state revenues, 26 percent of total investments, and 40 percent of total exports.

Last year, Norway’s richest saw their numbers plunge by 54 percent and their total wealth plummet 51 percent annually to a mere US$90 billion, according to the Wealth-X report quoted by CNN.

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Out of North Europe and on the other side of the globe, in Australia, the number of the ultra-rich declined 31 percent, while their total wealth dropped 33 percent, to US$295 billion.

Australia produces and exports coal, copper, gold, and iron ore, and low commodity prices have surely not helped the ultra rich to further increase their energy-related assets. In addition, China, one of Australia’s top 10 trade partners, has shown signs that its economic growth has slowed in the past year.

According to Wealth-X research analyst Benjamin Kinnard, crude prices at current levels for longer may have wider consequences on the super rich.

“And some of these people impacted will have to make long-term changes to adapt rather than ride it out,” CNN quoted Kinnard as saying.

So, some ultra rich millionaires may have to diversify portfolios, or move to countries less dependent on oil revenues, and with lower income taxes.

Oil prices may have stung some super rich, but they have not in the least affected the richest ranks—billionaires. Last year total billionaires’ wealth increased 5.4 percent, the Wealth-X report showed.

By Tsvetana Paraskova for Oilprice.com

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