Lower for longer: How cheap oil can damage your wealth

[Estimated time to read: 3 minutes]

Oil prices are falling – great news, right? Cheaper fuel, travel, clothing… cheaper everything?!

Up to a point, yes. 

If you're an expat, chances are you either work in a company connected to the Oil Industry, or you live in a country dependent on it. 

In which case, you already know oil prices are hitting 12-year lows.

So what should you do? 

Well, you start by thinking through the implications for you and your family. 

We believe there are three big things to think about, and one big thing to do right now.

Here's what to think about:

1. Many expat-heavy countries (the UAE, Saudi, Qatar, for example) have pegged their currencies to the dollar. It makes it easy for everyone.  And surely it removes lots of boring currency risk for expats who otherwise need to trade in and out of different rates?  Well... maybe not. 

   The longer oil prices stay where they are, the weaker the financial position of the countries dependent on oil to sustain their economies. Already, there are signs of stress on currency pegs in some countries – hedge funds and currency speculators are starting to circle like vultures anticipating a feast. When currencies 'unpeg', as the Swiss Franc unexpectedly did in 2015, they move fast. If you're in the wrong currency at the wrong time, you lose a lot of your savings.

   And big currency moves can trigger some other, ugly stuff: capital controls, frozen assets (think Cyprus in 2011) and bank runs. We're not saying this will happen – but we are noting storm clouds are gathering. It's impossible for oil prices to move this low, this quickly, and for nothing to change as a result.

2. No one knows where oil prices will be a month, year or decade from now. Lots of people think they do, but they're pretty much always wrong. So don’t pin your hopes on prices moving to a point you 'need' – markets rarely help us out in this way! 

   Instead, take a cold, hard look at your investments and savings – and work out what you have and how to protect it. Think about what you're doing and if it still makes sense. Plan the changes you need to make – and make them!

3. Markets are littered with cases of people failing to learn the lessons of the past. Whether it's savers in the UK putting money into Icelandic banks, speculators in Dubai Real Estate, or traders in Tulips (yes, really!), people make the same mistakes again and again. 

   In lots of expat markets, conditions are ripe for another rude awakening: the stress in oil-dependent economies exposes lots of uncomfortable realities. 

   Talk to your friends in other businesses and sectors and find out how they’re doing: there’s a gathering sense 2016 could be a difficult year for many of the GCC and other expat countries.  Think about what this means for you, and don’t get caught napping. Careful planning costs you nothing.

And here's the thing you need to do TODAY:

Look at how much money you have in your local bank account, in your expat country currency. There's almost certainly too much there. And send some of it to your offshore bank account. 

Haven’t got an offshore bank account set up? 

Then get it done RIGHT NOW. 

We don’t know what's going to happen tomorrow, but you'll sleep much easier knowing you have the right pieces in place to protect your family's wealth in the event the unlikely becomes a reality.