All of the Gulf nations will cut government spending in 2016 to some degree, albeit carefully, and will accelerate legal reforms. To ease the burden on citizens, Saudi Arabia and the United Arab Emirates are reducing fuel subsidies but maintaining spending on education and social services. Bahrain has reduced food subsidies but is considering cash handouts to balance the cuts. The United Arab Emirates, Saudi Arabia, Oman, Qatar and Kuwait are all discussing implementing taxes to increase state revenue, a measure unprecedented in the regional bloc.

Saudi Arabia is the most important country to watch. In addition to the careful cuts in social spending, the government has already started to privatize assets, starting with three major airports. Riyadh has even discussed floating a part of state-owned Saudi Arabian Oil Co., known as Saudi Aramco, in an initial public offering. Privatization will diversify the funding sources of these entities but also is politically risky. Deputy Crown Prince Mohammed bin Salman has hinted that reforms may be rapid, even as the king emphasizes the strength of the economy, but powerful members of the Saudi royal family will be wary of moving too swiftly. With dozens of privatization plans on the table, discontent within the ruling family is all but inevitable. Riyadh is also facing major regional changes with the return of Iran to the international economy and the enduring conflict in Yemen, meaning that defense and foreign spending will need to remain high.

Not all regional players have the fiscal advantage of the Gulf Cooperation Council. Algeria's economy is highly dependent on natural gas, and its foreign reserves dropped precipitously in 2015 because of lower oil export revenue, leading to a $10.8 billion deficit. A mild winter in Europe, a key market for Algerian natural gas, will not help the situation. Algeria has sought to boost foreign investment through tax reform and the introduction of import and export license authorizations. But the country is heading toward a precarious political moment: the eventual death of President Abdelaziz Bouteflika, who has held office since 1999. The nation's elite are now jockeying for position ahead of this transition; although continued reform measures are necessary, many will be wary of any that may erode their power. This will limit the country's options, compounding the current crisis.

In Iraq, both Baghdad and the Kurdish capital of Arbil are already in serious financial trouble. The national government and the Kurdistan Regional Government need to maintain high levels of spending to fund their battle against the Islamic State. With oil revenues dropping, this means they will need to reduce other expenditures. The governments do have the option of renegotiating their contracts with international oil companies. Baghdad is in the midst of such talks to replace its current contract, which stipulates that Baghdad pay oil companies a fixed fee. Arbil is juggling its security situation with payments to international oil companies and the giant Kurdish civil service sector. The Kurds have already made it clear that they have no plans to export oil through Baghdad's state-owned marketing company but will instead market it themselves and export through Turkey. Ankara and the Kurdistan Regional Government in Arbil will grow closer as both increase energy cooperation and deal with the mutual threat of the Islamic State. Arbil's increased suffering under low oil prices will only strengthen this relationship.

Amid low oil prices, February elections are also approaching in Iran. Iranian President Hassan Rouhani will be banking that his talks with the West and success in negotiating the end of sanctions will help moderates and his traditional conservative allies defeat hard-line conservatives. The opposition has asserted that Rouhani's economic policies are not working. Low oil prices will make these arguments only more credible. The end of sanctions will enable Iran to increase the volume of its exports, but with prices down nearly 70 percent since 2014 the revenue generated will not reach the level it would have two years ago. This realization may not become clear to voters until after February elections, meaning Rouhani could perform well. But by 2017, the discrepancy will likely be obvious, jeopardizing his chances for re-election in 2017.

Latin America

Oil-dependent and ailing Venezuela will suffer a great deal because of sustained low oil prices. Annual inflation is already at nearly 300 percent according to leaked central bank estimates. Inflation will mount and shortages will become even more extreme. Lower oil export revenues will reduce the country's expenditures not accounted for in the budget, which in 2015 supplied much of the additional foreign currency needed to finance imports and foreign debt payments. Venezuela will likely need to decrease imports, and the country could even default on its foreign debt later in 2016. In the near term, the government, now with an opposition supermajority, will take what steps it can to address the economic situation. Currency devaluation and consumer price hikes would be the most effective remedy, but these would come with unacceptable political costs. Further unrest is inevitable, and the government will need to work to contain this from spreading too widely.

Brazil's economy has already sustained a great deal of damage from the corruption scandal in state-owned energy firm Petrobras. Unless the government decides to curb the major criminal investigation into the company and associated officials, the scandal will continue to disrupt supply chains and contractor financing, further delaying existing projects. In response to the disruptions, Petrobras will need to further cut its investment plans, which will slow future foreign investment and energy production.

Ecuador's oil exports plummeted by 30 percent in 2015 and will continue to be low through the next year. Quito has the option of imposing trade barriers to reduce imports and to compensate for lower export revenue, but this would compound the economic slowdown. The nation will hold a presidential election in February 2017, which could highlight eroding public approval for the ruling Alianza Pais coalition because of the declining economy.

North America

North America has, of course, been under the same low oil price pressure as the rest of the world. Nevertheless, production has been resilient in recent months, staying at around 9.2 million barrels per day since October. Production has the potential to fall again, however, as the oil hedges taken out against low oil prices in 2015 expire. The remaining 2016 hedges are mostly at a lower volume or price, a fact that will increase the burden on oil-producing companies.