Germany's oil conundrum

In recent months, German economic indicators have all been pointing upward, with business confidence in January increasing for the third consecutive month, and consumers remaining in spendthrift mood on the back of stable employment and rising incomes.

Already, the German central bank, the Bundesbank, heralded the end of a "period of weakness" seen in the middle of last year, predicting a robust upswing for 2015 in its latest monthly report, published last week. Among other favorable conditions that are boosting business prospects here, the bank cited the low value of the euro, thanks to the European Central Bank's ultraloose monetary policy, as well as the sharp drop in oil prices at the beginning of this year.

Downsides emerging

Notably, falling oil prices are a boon for the German economy as they cut companies' energy bills, thus making production cheaper. However, as crude prices have almost halved in the past six months, this is showing some negative repercussions on German trade, too, says Volker Treier, deputy managing director of the German Chambers for Industry and Commerce (DIHK).

"The slump in oil prices is beginning to dampen our exports to resource-rich countries," he told the news agency Reuters on Tuesday. "As they are short of billions in oil revenue, many oil-producing countries and companies there have postponed investments."

According to latest figures from the German statistics office, Destatis, exports to the 12 member states of the Organization of Petroleum Exporting Countries (OPEC) dropped 7 percent year-on-year in November 2014. By contrast, overall German exports grew 1.4 percent in the period.

The weakest hit hardest

The data show the most significant decline for exports to Libya, which plummeted by 27 percent in the period. Shipments to Iraq fell by 23.5 percent, while the United Arab Emirates imported 22 percent less from Germany than in November 2013.

German exports to Saudi Arabia were down by just 0.4 percent. The kingdom is partly responsible for the current oil price war because it refused last year to cut OPEC's 30-million-barrel-per-day oil output. John Sfakianakis, emerging market specialist with Ashmore investment firm believes the oil-rich Gulf states are better suited to sustain low oil prices than poorer OPEC members Venezuela, Russia and Libya, for example.

"Saudi Arabia, but also Qatar, Kuwait and the United Arab Emirates are well able to withstand the pressures from low oil prices for the medium term. That is why we don't expect them to halt their megaprojects that are currently under way," he told German business daily Handelsblatt on Friday.

With regard to Russia, which is not an OPEC member, Germany's 2014 export statistics look much more dramatic. Western sanctions over Ukraine, falling oil prices and the dramatic slump in the ruble have caused German deliveries to nosedive 18 percent. Eckhard Cordes, head of the Committee on Eastern European Economic Relations, has already warned against complacency over Russia's troubles, saying a destabilization of Russia couldn't be in anybody's interest.

"The decline has accelerated month by month. If this continues, we could experience an even bigger fall," he told a German newspaper on Friday.

Benefits prevail

DIHK's Volker Treier believes, however, that, on balance, the oil price slump is benefiting Germany's economy more than it is hurting it. Declines in exports to OPEC and other oil-producing countries, he said, would likely be offset by rising demand for German goods elsewhere.

"This is likely to be overcompensated by other world regions, which will see an increase in purchasing power and lower production costs," he told Reuters.

Among the countries likely to cushion the blow are China, India and Turkey, according to Treier. Rising demand in advanced economies in Europe and the Americas was also improving prospects for German exporters in 2015, he said.