As Crude Prices Plummet, Some SWF Managements Face a Challenging Test

January 27, 2015 by Nicholas Lansing

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With Brent falling below $49, many oil-dependent nations will be forced to tap their sovereign wealth funds or find other ways to meet their budgetary needs. Picture a hydrocarbon tempest: plunging demand for crude oil amid dampened economic activity in key world markets. The Organization of the Petroleum Exporting Countries (OPEC) in disarray as Saudi Arabia, the world’s largest oil exporter, refuses to cut production to bolster prices. Output in non-OPEC regions ramps up. Markets are spooked by deflationary worries. The dollar surges. Today’s headlines? No. It was the 1980s oil glut, which led to Brent crude prices falling 67 percent, peak to trough, from late 1985 to mid-1986. "We had spent the windfall from the 1970s oil boom," recalls Ewart Williams, a former governor of both the Republic of Trinidad and Tobago’s central bank and its $5.6 billion Heritage and Stabilization Fund (HSF), founded in 2007 and…

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