With oil cheap, Arab states cannot balance their books(economist.com)
economist.com
With oil cheap, Arab states cannot balance their books
https://www.economist.com/leaders/2020/07/18/with-oil-cheap-arab-states-cannot-balance-their-books
201 comments
I mean, this happened just a few years ago back in 2015, right? And 2008, and 2001, and 1998...
These petro states suffer from the curse of natural resources combined with leadership that is too busy feasting off of the intermittent boom cycle to prepare their people constructively for the bust that comes later. So you have entire countries that are basically dependent on the oil handout, and in bad times, have little industry to fall back on and wait for the next rise (or foment civil unrest).
Some of the leaders do know that they can't live on oil forever, so you see some sovereign wealth funds investing in things that their people can learn and use to build their society more resiliently. But in general the improvements are not very deep -- the money comes too easily and people get used to state intervention and not having to work.
It's a problem.
These petro states suffer from the curse of natural resources combined with leadership that is too busy feasting off of the intermittent boom cycle to prepare their people constructively for the bust that comes later. So you have entire countries that are basically dependent on the oil handout, and in bad times, have little industry to fall back on and wait for the next rise (or foment civil unrest).
Some of the leaders do know that they can't live on oil forever, so you see some sovereign wealth funds investing in things that their people can learn and use to build their society more resiliently. But in general the improvements are not very deep -- the money comes too easily and people get used to state intervention and not having to work.
It's a problem.
> I mean, this happened just a few years ago back in 2015, right? And 2008, and 2001, and 1998
The point here is that sub $40 oil is becoming the new norm. While these countries can weather a 2-3 year drop in oil prices, those short term drops are more and more frequent and the bottom keeps getting lower.
Between electrification of transportation and reduced travel which may last for another 6 months (or much longer, it's not really clear), demand is down. On top of that, any time oil stays over $50/ barrel for a prolonged period of time, shale oil and oil sands production increases putting downward pressure on prices.
Any way you look at it, there is no good news for oil-dependent states.
The point here is that sub $40 oil is becoming the new norm. While these countries can weather a 2-3 year drop in oil prices, those short term drops are more and more frequent and the bottom keeps getting lower.
Between electrification of transportation and reduced travel which may last for another 6 months (or much longer, it's not really clear), demand is down. On top of that, any time oil stays over $50/ barrel for a prolonged period of time, shale oil and oil sands production increases putting downward pressure on prices.
Any way you look at it, there is no good news for oil-dependent states.
Demand is temporarily down because of covid and the russia/opec dispute. Consumption was hitting records before that, and the EIA projects over 100m barrels/day next year:
https://www.eia.gov/outlooks/steo/report/global_oil.php
Also take a look at this inflation adjusted crude oil chart: https://www.macrotrends.net/1369/crude-oil-price-history-cha...
You have a high period from 1980-85 and from 2005-14... but those are the exceptions rather than the norm. I'm sure they got spoiled by the high prices, but $40-50 is a normal price for oil.. and they'll learn to adjust like they have in the past.
The electrification of transportation is great and it'll eventually have the effects your mention... but right now, those effects are out weighed by the growth in developing markets. Very similar effect as renewables and coal. Coal use will keep growing through 2030, even though renewables are growing rapidly. The demand for these things (vehicles, energy) is much higher than what the clean economy can deliver at the moment.
Also take a look at this inflation adjusted crude oil chart: https://www.macrotrends.net/1369/crude-oil-price-history-cha...
You have a high period from 1980-85 and from 2005-14... but those are the exceptions rather than the norm. I'm sure they got spoiled by the high prices, but $40-50 is a normal price for oil.. and they'll learn to adjust like they have in the past.
The electrification of transportation is great and it'll eventually have the effects your mention... but right now, those effects are out weighed by the growth in developing markets. Very similar effect as renewables and coal. Coal use will keep growing through 2030, even though renewables are growing rapidly. The demand for these things (vehicles, energy) is much higher than what the clean economy can deliver at the moment.
Prices have dropped more frequently because of US shale oil. Electrification is a very small factor (yet).
Fair enough on all points.
Electrification is the longer term existential threat. Even if 20% of vehicles are electric, the impact on demand and oil prices will be profound.
Electrification is the longer term existential threat. Even if 20% of vehicles are electric, the impact on demand and oil prices will be profound.
You might sum it up as:
These countries weather boom/bust cycles in oil prices, waiting for a 'someday' to refill their coffers, and every year there are more and more things trying to put off 'someday' a little longer.
Essentially these countries have an antagonistic relationship with the rest of the world, as do quite a few corporations really. If you only get good news when everyone else gets bad news, then you've made an enemy of your customers. They just might know it yet. Lots of them will be working in an uncoordinated fashion to make their bad news a little better, making your good news worse and worse.
Once word gets around they'll start teaming up.
These countries weather boom/bust cycles in oil prices, waiting for a 'someday' to refill their coffers, and every year there are more and more things trying to put off 'someday' a little longer.
Essentially these countries have an antagonistic relationship with the rest of the world, as do quite a few corporations really. If you only get good news when everyone else gets bad news, then you've made an enemy of your customers. They just might know it yet. Lots of them will be working in an uncoordinated fashion to make their bad news a little better, making your good news worse and worse.
Once word gets around they'll start teaming up.
> Once word gets around they'll start teaming up.
They were able to do this fairly successfully until shale oil and spoiled their intermittently successful collusion.
They were able to do this fairly successfully until shale oil and spoiled their intermittently successful collusion.
They were only able to do it because Saudi Arriba was willing to take almost all of the cuts required. In the 1970s opec vot better compliance, but cartels tend to fail because it is the benifit of the individual to defect while everyone else makes cuts. Saudi Arriba is not able to make deep enough cuts alone though, and it is hard to see anyone else making them.
I've always wondered how much black market petroleum is state sanctioned. Unofficially, of course.
Eventually New England will also have to outlaw the use of #2 heating oil.
I know it is the southern end of New England but a friend of mine in Connecticut just switched to a pellet stove for heating his large home. He plans to pay for the stove in two winters worth of heating.
"The point here is that sub $40 oil is becoming the new norm"
Crude is currently $41.74 as of 1:10PM EDT.
Crude is currently $41.74 as of 1:10PM EDT.
Also a fair point, but since most of these countries need oil to be at $70-80/ barrel to balance their books, do you think they will care about how that hair is split?
Did I not hear that some of those high numbers either have to do with corruption or over-reliance of public services on socialized oil industry profits?
Last time this came up someone was trying to make the argument that the reason some countries need 50% higher oil prices has less to do with the costs of extracting and shipping the oil and more to do with the cost of doing business in that country.
If so, you may see some pressure to change the equation, for better or worse.
Last time this came up someone was trying to make the argument that the reason some countries need 50% higher oil prices has less to do with the costs of extracting and shipping the oil and more to do with the cost of doing business in that country.
If so, you may see some pressure to change the equation, for better or worse.
I highly doubt reform will be high on the list of priorities for a corrupt regime in decline. I would expect that the poor and middle class would suffer far more and first.
I did not mean to imply that the pressure would necessarily be orderly or civil.
Which is the highest WTI crude has been in months.
I don't think it's about demand. If oil price were regulated as a honest market, it would cost much lower. Oil price is regulated by OPEC cartel. They could make it $200 if they want. I think that they're manipulating price low enough to slow development of non-oil energetics as much as possible and high enough to stay profitable. Also they're interested to put a pressure on Russia and some other countries, because Russia spends much more to get oil from the earth, so their margins are much tighter.
No, they most likely can't really make it $200 for any significant amount of time. As everyone else at the moment they have to navigate the market, that now has more producers.
>If oil price were regulated as a honest market, it would cost much lower.
No, if oil was regulated as an honest market, it'd have the CO2 externality priced in to make it carbon neutral. That'd make the price significantly higher.
No, if oil was regulated as an honest market, it'd have the CO2 externality priced in to make it carbon neutral. That'd make the price significantly higher.
> Oil price is regulated by OPEC cartel. They could make it $200 if they want.
This is why oil prices have been high since the late 70s. Shale oil and oil sands have put a big damper on the OPEC's ability to set prices. The only control OPEC has on oil prices is by limiting supply. Limiting supply to control prices only works when you can reap the rewards. If OPEC drops prices and US shale oil companies turn up the volume, then OPEC only gets the downside of limiting supply while shale oil gets the profits.
This is why oil prices have been high since the late 70s. Shale oil and oil sands have put a big damper on the OPEC's ability to set prices. The only control OPEC has on oil prices is by limiting supply. Limiting supply to control prices only works when you can reap the rewards. If OPEC drops prices and US shale oil companies turn up the volume, then OPEC only gets the downside of limiting supply while shale oil gets the profits.
OPEC just doesn't have enough pricing power anymore.
As they say in the oil industry: the cure for low oil prices is low oil prices. In any case, if the developing world is really to develop as much as hoped for and claimed they will need a lot of oil. Even if it is all renewables based (which is a fantasy) those renewables require large oil inputs to be manufactured (those 400 ton mining trucks won't be electrified anytime soon). So while I expect oil to be down over the next year or so, I think the long-term trend is upwards, for better or for worse.
The heavy trucks used in the mining industry are almost entirely electric. If a truck is going underground, much better for it to not be spitting fumes that will kill your workers, and if the mine is at the top of a hill, the regenerative braking from a loaded truck going downhill will charge the batteries so much that the trucks rarely, if ever, have to be manually charged.
Some of the trucks in question: https://www.komatsuamerica.com/equipment/trucks/electric
Some of the trucks in question: https://www.komatsuamerica.com/equipment/trucks/electric
Those have diesel engines. You don't know what you're talking about. The electric drive is to make power transmission easier, and yes, to allow for regenerative breaking.
It allows regenerative braking in principle, I don't know if any mining truck actually has one. Imagine the size and weight of a battery to power a 200T truck (total weight up to 385 metric tons) for any significant time. These trucks use induction brakes, which do not give back any energy, for the same reason they use electric motors instead of a gearbox - a lone friction brake for such a heavy machine would be too heavy and wear out too quickly (they do have auxiliary friction breaks, though).
Yeah, you're right. I had two different Komatsu PR things open and one was talking about regenerative braking and the other was for these electric drive trucks. Doesn't look like they have any sort of battery. Just alternators to generate electricity from the diesel engines.
Thanks for the comment. I took the previous poster's comment at face value (seemed like common sense). My internal db has been updated.
The comment is wrong. Those trucks have diesel engines. It's even on the page they posted. The electric drive is for power transmission/traction control.
> those 400 ton mining trucks won't be electrified anytime soon
https://www.popularmechanics.com/technology/infrastructure/a...
https://www.popularmechanics.com/technology/infrastructure/a...
I'm aware of these developments. I still don't think it's going to happen at scale. The economics are not favorable for electrifying these vehicles.
Mining trucks and industrial infrastructure don't really reflect the bulk of petroleum use. Something like 2/3 of the total US petroleum input goes to simple civil transportation alone.
Heavy industry and core infrastructure are the last things that people interested in renewables will be fighting over. The low hanging fruit of personal vehicles and electricity generation is what's killing the middle east oil cartel.
Heavy industry and core infrastructure are the last things that people interested in renewables will be fighting over. The low hanging fruit of personal vehicles and electricity generation is what's killing the middle east oil cartel.
The passenger transport market drives the others. Engine development is not easy when you need to meet modern emissions. Switch passenger cars to electric and the others won't have enough money to do the basic research needed for the next engine.
Sure, my point is just that the developing world is going to use a lot of petroleum in order to develop. Mining was just an example of where it's used. No one commenting has refuted that, and the people talking about electric mining trucks don't know what they are talking about and have probably never been to a mine before.
> Sure, my point is just that the developing world is going to use a lot of petroleum in order to develop.
And mine was that it doesn't need to. The only reason it needs a ton of oil is if it wants to emulate the US obsession with private transportation, which even the US is getting away from. It's not like Civ 6 here: they don't need to invent the internal combustion engine for themselves.
And mine was that it doesn't need to. The only reason it needs a ton of oil is if it wants to emulate the US obsession with private transportation, which even the US is getting away from. It's not like Civ 6 here: they don't need to invent the internal combustion engine for themselves.
There is no realistic path to development based on renewables without setting global living standards significantly below current developed world living standards. Just look at the number of countries that are developing. Look at their populations, and assume 50% of those populations get to 50% of European levels of energy use. Now look at the transition to renewables. Also note that 50%+ of "renewables" in Europe is biomass, which is arguably not renewable and environmentally destructive.
The idea that developing countries can develop without increasing global demand for oil is a fairy tale, and impossible to believe by anyone who thinks about the issue for more than a few minutes. Admittedly, there are in theory possible paths that would avoid an increase in fossil fuel demand, but I have never seen someone bring them up when discussing this, nor have I even seen an understanding of the basic problems that need to be circumvented.
The idea that developing countries can develop without increasing global demand for oil is a fairy tale, and impossible to believe by anyone who thinks about the issue for more than a few minutes. Admittedly, there are in theory possible paths that would avoid an increase in fossil fuel demand, but I have never seen someone bring them up when discussing this, nor have I even seen an understanding of the basic problems that need to be circumvented.
The scenario is "without oil" and not "based on renewables".
My argument is oil dependence is a ball and chain on the aspirations of the developing world. The need of minor counties to buy oil in dollars chains them to the US and European dominated financial system with ruthlessly exploits them and savages countries that try to fight back. Once the leaders of those countries are confident they can do without constantly importing oil they're going to run for the exits as fast as they can.
I don't like it when people here downvote things they don't agree with.
For one, it makes it hard to find the counterarguments, which are often where the best parts of the discussion are.
I think the point about the cure for low oil prices is low oil prices stands on its own, but not as a virtue (not that I think you were implying that).
It's a warning. Low oil prices cause complacency, which means the next minor emergency we have to go crawling back to them whether we want to or not. Low oil prices are the anesthetic in the mosquito's saliva.
For one, it makes it hard to find the counterarguments, which are often where the best parts of the discussion are.
I think the point about the cure for low oil prices is low oil prices stands on its own, but not as a virtue (not that I think you were implying that).
It's a warning. Low oil prices cause complacency, which means the next minor emergency we have to go crawling back to them whether we want to or not. Low oil prices are the anesthetic in the mosquito's saliva.
Mining trucks are easily electrified. Long distance transport is the challenge.
Trains would like to have a word.
With 10s of thousands of miles of lines, it would be pretty monumental to electrify the entire US train system. Considering how efficient modern diesel trains are, That should be pretty low on our list of things to convert.
Nuclear trains might make sense with some of the newer reactors... but we know that'll never happen.
Nuclear trains might make sense with some of the newer reactors... but we know that'll never happen.
> Nuclear trains might make sense
Modern steam engines!
But I guess they'd have to construct a lot of water stations. The stops to take on water might negate some of the advantages.
Modern steam engines!
But I guess they'd have to construct a lot of water stations. The stops to take on water might negate some of the advantages.
Diesel trains are already electric. Their drive motors are electric with big Diesel generators on top. Their efficiency is due to their hybrid nature.
True although even in Europe where almost all mainlines are electrified, many freight trains are diesel-electric. That's because often the the plant loading docks etc. aren't electrified.
Most freight is carried by diesel trains. While it is possible to use electric engines, the ecconmics don't work out and so only a minority of freight is on electric trains.
Are you talking about the world or the US? Living in europe, I‘ve never seen a diesel train and the economics are just fine for electric trains.
There are diesel trains in Europe. They tend to be more on branch lines, though, with the main trunks being electric. (Electrifying every branch is not economic.)
In the US, it could still be done (and has), but the economics are not as compelling because the price of diesel is lower.
In the US, it could still be done (and has), but the economics are not as compelling because the price of diesel is lower.
I'm told that the big railroads in the US have a plan to electrify their main line. It remains a plan because the costs are more high enough that it isn't worth it. If they decide fuel costs will go up by enough they will dust off the plan and electrify.
Diesel-electric trains. They're basically Diesel generators with electric drive motors.
Even renewables need tons of fossil to lubricate moving parts. Generators in a turbine alone is a massive oil guzzler. The world will always need oil until a synthetic lubricant that isn't insanely cost prohibitive.
We know how to make lubrication oil from other sources. Natural gas is a molecule easy to make from organic sources, and from there we already have the industrial processes to may synthetic oil. It costs a lot more than regular oil, and making your own natural gas drives up the cost, but it isn't impossible. Note that we can also make synthetic gasoline, last I checked (long ago, gasoline was $1.30/gallon) you could buy drums for about $8/gallon, the only people who paid that price were on a track and good enough that a better fuel was the difference between win and loss.
Yes, but the amount surely matters. If machines or car only require oil for lubrication, for example, that's probably one or two orders of magnitude less of oil needed.
It's not strictly a "wrong leaders" problem. It's much more systemic than that. Elect a good leader and the oil will provide the impetus to tear that leader down.
Industry also won't form because of Dutch disease. Who wants to build a factory in Saudi Arabia even if it weren't unstable? Everything just costs too much because of the oil - land, materials, labor.
Sovereign wealth funds also don't really solve the problem because 1) they attract corruption like flies on shit and 2) they're vulnerable to confiscation from foreign governments if they decide they don't like your face (e.g. Venezuelan gold in London).
I suspect it could be that there is no simple solution to this. Potentially you are just fucked if you're a poor unstable country with oil and theres nothing you can really do about it. No leader will save you and no policy will help.
Industry also won't form because of Dutch disease. Who wants to build a factory in Saudi Arabia even if it weren't unstable? Everything just costs too much because of the oil - land, materials, labor.
Sovereign wealth funds also don't really solve the problem because 1) they attract corruption like flies on shit and 2) they're vulnerable to confiscation from foreign governments if they decide they don't like your face (e.g. Venezuelan gold in London).
I suspect it could be that there is no simple solution to this. Potentially you are just fucked if you're a poor unstable country with oil and theres nothing you can really do about it. No leader will save you and no policy will help.
> It's not strictly a "wrong leaders" problem. It's much more systemic than that. Elect a good leader and the oil will provide the impetus to tear that leader down.
See also, The Dictator's Handbook, summarized well by CGP Grey's video "The Rules for Rulers" (https://www.youtube.com/watch?v=rStL7niR7gs).
It's an unstable equilibrium to run a country on a wide power base, if it has centralized resource-extraction economy; as any dictator who just plans on staging a coup to take the oil and then reward their few revolutionaries with it, will be able to win over pretty much anyone from the previous wide-base government, who was previously getting a much-smaller slice of the pie.
See also, The Dictator's Handbook, summarized well by CGP Grey's video "The Rules for Rulers" (https://www.youtube.com/watch?v=rStL7niR7gs).
It's an unstable equilibrium to run a country on a wide power base, if it has centralized resource-extraction economy; as any dictator who just plans on staging a coup to take the oil and then reward their few revolutionaries with it, will be able to win over pretty much anyone from the previous wide-base government, who was previously getting a much-smaller slice of the pie.
Norway kind of proves it is possible to make it work without the corruption. But Norway also proves that you need to lay the groundwork for that, before you lay any actual groundwork. I am not sure if these other oil producing states could reach a level of stability as Norway.
Norway used to be a relatively poor country by Western European standards but had a functional economy before oil. Homogeneity, a staunchly hard-working and independent population, being surrounded by lutheran economies, and "bondevett", is why Norway turned out well.
That's not really true, Norway was one of the richest countries in the world long before the oil boom. In Europe it was only behind Luxembourg, Switzerland and Sweden by GDP per capita in 1960.
You're right. I've lived in Norway and was repeatedly told by Norwegians the country used to be poor, something I believed (there isn't much in Norway that reminds of a wealthy past). Apparently it's just a myth [1][2].
[1] https://www.dnva.no/detskjer/2019/11/en-feiloppfatning-norge...
[2] https://www.aftenposten.no/meninger/kronikk/i/LM1L1/Hvorfor-...
[1] https://www.dnva.no/detskjer/2019/11/en-feiloppfatning-norge...
[2] https://www.aftenposten.no/meninger/kronikk/i/LM1L1/Hvorfor-...
Norway proves it's possible. However, without a second clear example it's difficult to prove exactly what it is about Norway that makes it possible. Is it culture? Wealth? The timing? Sheer good luck in governance? A combination? It's hard to tell.
The far right frequently claim it's something to do with a lack of colored immigrants, for instance.
The far right frequently claim it's something to do with a lack of colored immigrants, for instance.
Your racist characterization of the far right detracts from your point.
> Norway kind of proves it is possible to make it work without the corruption
The Norwegian state and identity were formed before oil.
The Norwegian state and identity were formed before oil.
I am not sure Francisco de Miranda and Simón Bolivar had oil on their minds when they effectively established Venezuela as an independent state from Spain.
Norway does not prove that at all.
Norway has almost no industry other than oil. If oil shut down tomorrow their sovereign fund could keep the country running for about 10 years.
10 years isn't really long enough to transition to other industries. It's barely long enough to educate the next generation in new technology.
(Source: Norway's imports per capita were $16.9k, and its fund is $195K per capita.)
Norway is hoping that oil will shut down slowly, giving them time to transition, using the fund as a cushion. But historically industries tend to shut down "slowly, then all at once".
Edit: I didn't see you wrote "work without the corruption". My reply is misdirected, my reply is about the economy. In regards to corruption I agree with you.
Norway has almost no industry other than oil. If oil shut down tomorrow their sovereign fund could keep the country running for about 10 years.
10 years isn't really long enough to transition to other industries. It's barely long enough to educate the next generation in new technology.
(Source: Norway's imports per capita were $16.9k, and its fund is $195K per capita.)
Norway is hoping that oil will shut down slowly, giving them time to transition, using the fund as a cushion. But historically industries tend to shut down "slowly, then all at once".
Edit: I didn't see you wrote "work without the corruption". My reply is misdirected, my reply is about the economy. In regards to corruption I agree with you.
> vulnerable to confiscation from foreign governments if they decide they don't like your face
This should be a sign that the rule of law is in decline all over the world. What UK did and the US is doing is completely absurd, even when dealing with an authoritarian regime. Not only UK is holding gold that is not owned by them, but it is giving that gold to a pirate designated by the US.
And this is bad not just for the particular case, but it may also be used as precedent for similar illegal actions against other governments that don't subscribe to the US gospel.
This should be a sign that the rule of law is in decline all over the world. What UK did and the US is doing is completely absurd, even when dealing with an authoritarian regime. Not only UK is holding gold that is not owned by them, but it is giving that gold to a pirate designated by the US.
And this is bad not just for the particular case, but it may also be used as precedent for similar illegal actions against other governments that don't subscribe to the US gospel.
"the rule of law" is different from "one
world government".
"Foreign government" means "different laws".
https://www.bbc.com/news/world-latin-america-53262767
"Foreign government" means "different laws".
https://www.bbc.com/news/world-latin-america-53262767
Interestingly, the first thoughts that come to mind on how to mitigate this problem fit Saudi Arabia very well (as far as I know, I am no expert). Invest in a considerable security force, try really hard to ingratiate yourself with a few powerful foreign allies that have a vested interest in your stability, and then fund education like mad, especially sending children to foreign universities, to try to raise the capability level of the country before the wheels fall off.
Those mitigations will help, but one of the fundamental problems the Gulf countries will have to address is the cultural expectation that their citizens won't do hard work. When it starts becoming infeasible to import the entire construction industry from India, Saudi citizens are going to have to start taking those jobs, and they're not going to be happy about it no matter how smooth the transition is.
Investing money into raising the capability level of these rich states usually has a very low success ratio mostly because their societies do not value labor but authority, power and money of which they have plenty.
This is what China's elite have been doing...
Their "hundred year plan" is fn' formidible and they really will be the super-power based on, not only, their implementation of it - but the lack of forethought from literally any other nation on the planet, save Norway.
Their "hundred year plan" is fn' formidible and they really will be the super-power based on, not only, their implementation of it - but the lack of forethought from literally any other nation on the planet, save Norway.
Vancouver real estates begs to disagree!
> Who wants to build a factory in Saudi Arabia even if it weren't unstable? Everything just costs too much because of the oil - land, materials, labor.
So, import all the inputs you can and sell the output on the local market where everything is expensive.
Dutch disease is way more complicated than just "there's too much money coming from this source, the economy is fucked-up". I would really like to see any non-simplified study for a change.
So, import all the inputs you can and sell the output on the local market where everything is expensive.
Dutch disease is way more complicated than just "there's too much money coming from this source, the economy is fucked-up". I would really like to see any non-simplified study for a change.
The real cause of Dutch disease is not economical, but political. Political forces formed from the exploration of oil (and other resources, like banana-producing land in central America) will not allow for the formation of a diversified industry where they will have less ability to control the host country. These political forces are a combination of both external (developed nations) and small minorities that benefit from the maintenance of the status quo.
Dutch disease was named after the Netherlands where the phenomenon was first observed - with North Sea oil. It was a highly valued currency, not politics, that rendered Dutch exports noncompetitive and shrank foreign investment.
Imported Inputs into a GDP will always be SPOF...
Wont they?
Like you need to have serious incentives to import all your inputs.
Else, you are a leeching economy regardless of the value of your goods (Apple)
Wont they?
Like you need to have serious incentives to import all your inputs.
Else, you are a leeching economy regardless of the value of your goods (Apple)
My comment was about a single factory. In theory all the factories could import all their inputs, because the commodity that is causing the Dutch disease will offset it, but on the micro-level, a company can take advantage of a low average salary yet high costs market that is characteristic of the disease.
So an upstart smartphone manufacturer could take advantage of the high local salaries to manufacture a local brand of overpriced smartphones solely for the local market?
I'm not sure that's viable nor helpful as an idea when you can just import iPhones from China.
I'm not sure that's viable nor helpful as an idea when you can just import iPhones from China.
They should vertically integrate while they can. Produce exportable goods and materials with the oil.
" too busy feasting off of the intermittent boom cycle to prepare their people constructively for the bust that comes later."
It's much worse than merely 'feasting and fasting' - the problems are very deep, another way of putting it, there was 'not much at all' in these places at all, then they had oil, and the absence of other parts of the economy isn't quite so much an artefact of dysfunction, rather, it never existed in the first place.
Many of these places had 3% literacy 2 generations ago, and much of the civic institutional infrastructure (I mean like 'laws' and 'Judiciary' and 'Governance' etc.) is as new as many of those shiny buildings.
Let alone the absence wide networks of useful artisanal know-how spread from generation to generation, or at least, such information that can be used to found industry.
If Oil permanently crashed, it would be very bad and there would be no recovery. The Gulf States would be the poorest states in the Middle East. Saudi Arabia would be like Yemen or Algeria.
It's much worse than merely 'feasting and fasting' - the problems are very deep, another way of putting it, there was 'not much at all' in these places at all, then they had oil, and the absence of other parts of the economy isn't quite so much an artefact of dysfunction, rather, it never existed in the first place.
Many of these places had 3% literacy 2 generations ago, and much of the civic institutional infrastructure (I mean like 'laws' and 'Judiciary' and 'Governance' etc.) is as new as many of those shiny buildings.
Let alone the absence wide networks of useful artisanal know-how spread from generation to generation, or at least, such information that can be used to found industry.
If Oil permanently crashed, it would be very bad and there would be no recovery. The Gulf States would be the poorest states in the Middle East. Saudi Arabia would be like Yemen or Algeria.
1985...
Afghanistan, Iraq/Iran War, Balkans, Chechnya, Afghanistan again, Somalia, Iraq/Syria, Yemen.
KSA’s population has doubled in 30 years and they like to burn through excess youth by exporting them. They’re going to need another, bigger war or domestically they’ll be in trouble.
Afghanistan, Iraq/Iran War, Balkans, Chechnya, Afghanistan again, Somalia, Iraq/Syria, Yemen.
KSA’s population has doubled in 30 years and they like to burn through excess youth by exporting them. They’re going to need another, bigger war or domestically they’ll be in trouble.
>Some of the leaders do know that they can't live on oil forever, so you see some sovereign wealth funds investing in things that their people can learn and use to build their society more resiliently
Do the Saudi's have the experience and culture to make this work? $90B invested in Softbank Vision Fund. [0]
[0] https://www.businessinsider.com/saudi-arabia-45-billion-with...
Do the Saudi's have the experience and culture to make this work? $90B invested in Softbank Vision Fund. [0]
[0] https://www.businessinsider.com/saudi-arabia-45-billion-with...
A long time ago on an island far away... called Nauru, they tried to invest their wealth from their natural riches (phospor fertilizer). It didnt work out, if I remember correctly.
It's a strategy that's worked well for Norway though
Doesnt Norway still produce oil? Naurus strategy also worked well as long as they were producing. (Although I am not worried about Norway, even if the investment were not to work out as intented, their economy seems sound)
However Norway was already one of the richest countries in the world before the oil boom. So there wasn't as much pressure on their government to spend that income immediately instead of investing it.
Its also worth considering that Norway has a highly educated, intelligent population and an open, protestant culture. Countries without these traditions or a less educated population are more prone to corruption and mismanagement.
Is that investment just finding a place to park money? Or does it do something good for the every day Saudi citizen? I don't follow the issue closely enough to know.
Following the list of Softbank "successes" seems like a decent proxy.
In the long run the cost of energy approaches 0 and ultimately heat dissipation and space (and hence, speed) will be more relevant. But short-termism and individual greed have reigned supreme in most energy rich companies. At least Canada has a diverse economy to take up all the petro-refugees, even if we didn't build a serious wealth fund out of our oil as the Norwegians did.
I will make the snarky observation that if there is one good thing about the Norwegians and their petro fund, it's that they seem to have a national culture of being a bit ashamed of having come into so much money, and are willing to have it hoarded away for them for some future while they live relatively "modestly". It takes some self-discipline to not pressure your government to give handouts left and right when you're rich.
Oil money comes with strings attached and to completely ignore this in your analysis seems either uninformed or disingenuous.
So called Petro Dollars, for example, can't be just spent on anything. It is so difficult to dig up information on this (which was US state secret for a while btw) but iirc KSA must at least spend a portion of "their" Dollars on US treasuries. Another portion of "their" Dollars must go to US arms manufacturers. In return, US backed (formerly UK backed) Saud family gets to play King in Arabia.
So that "leadership that is too busy feating off" is aka Puppets of Western imperial colonials cum American hegemon's vassals. Any efforts by locals to denude themselves of the said "leadership" is not looked upon kindly by the "interantional community".
> the oil handout
That's cute!
So called Petro Dollars, for example, can't be just spent on anything. It is so difficult to dig up information on this (which was US state secret for a while btw) but iirc KSA must at least spend a portion of "their" Dollars on US treasuries. Another portion of "their" Dollars must go to US arms manufacturers. In return, US backed (formerly UK backed) Saud family gets to play King in Arabia.
So that "leadership that is too busy feating off" is aka Puppets of Western imperial colonials cum American hegemon's vassals. Any efforts by locals to denude themselves of the said "leadership" is not looked upon kindly by the "interantional community".
> the oil handout
That's cute!
Well, it's more severe now and as you pointed out yourself, it's becoming increasingly common. Not to mention a shift to renewables (despite some developing countries continuing to rely on oil), which may add increasing pressure.
That is a very valid point, however, how long before the US can't get away with simply printing money during financial crises ? :)
Longer than those of us who oppose printing money would like. The US economy has many different parts that stand well on the world stage and so it can get away with things.
Agriculture in the US is something that the middle east cannot duplicate. They could duplicate some other industry, though some of it has historical roots that will be hard to overcome starting from scratch.
Agriculture in the US is something that the middle east cannot duplicate. They could duplicate some other industry, though some of it has historical roots that will be hard to overcome starting from scratch.
It feels like this time is different because of the ongoing lack of demand. International flights from the US are looking to basically be nonexistent until there's a vaccine. After that, it's very plausible the business travel economy won't ever recover fully.
I agree that some of the more foresighted countries are making some of the right moves (though Saudi Arabia is probably kicking itself for not moving forward with the Aramco IPO last year), but I really wonder what the effects will be on the political stability of places like Iran and Iraq - they're not in great shape to start with, and this kind of economic shock seems like about the worst possible thing to really exacerbate all the problems that exist already.
I agree that some of the more foresighted countries are making some of the right moves (though Saudi Arabia is probably kicking itself for not moving forward with the Aramco IPO last year), but I really wonder what the effects will be on the political stability of places like Iran and Iraq - they're not in great shape to start with, and this kind of economic shock seems like about the worst possible thing to really exacerbate all the problems that exist already.
Flights account for very small single digit demand for oil. The main driver of the low demand is lower economic activity in general.
> International flights from the US are looking to basically be nonexistent until there's a vaccine.
But there's likely going to be a vaccine in less than a year. It will take several years to know to what extent it's really safe or effective, but people who travel a lot for business can get it right away if they want.
But there's likely going to be a vaccine in less than a year. It will take several years to know to what extent it's really safe or effective, but people who travel a lot for business can get it right away if they want.
"Likely" based on what? And does an unsafe vaccine (whatever that could be) really qualify as a vaccine? What would make it something a person who travels a lot for business would want to risk?
Likely based on the fact that they're already in mass production, so as long as they don't seem to be immediately killing people they're going to get released even without longterm data.
And someone who would travel for business if there were a vaccine at least has a reason to be an early adopter of the vaccine, whereas for someone who never leaves their house anyway it would make more sense just to wait for other people to find out whether it's safe and effective or not.
And someone who would travel for business if there were a vaccine at least has a reason to be an early adopter of the vaccine, whereas for someone who never leaves their house anyway it would make more sense just to wait for other people to find out whether it's safe and effective or not.
Sure, but (and?) given the way things have been going here in the US, I can't think of a reason not to wait for other people to find out!
Oxford vaccine is supposed to be done by September...
"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel"
Rashid bin Saeed Al Maktoum, Emir of Dubai
Rashid bin Saeed Al Maktoum, Emir of Dubai
While I understand the point he's trying to make, I'm not sure I understand how it can be true unless the underlying point is the classical one about how your children will inevitably squander your wealth.
Even if your wealth comes from a business that is only temporarily viable, your wealth will persist even if the underlying business does not, if it's conservatively invested. Additionally, rich people have no problem moving around in the world, so there's no need for the "petro-millionares" to remain in a country that is collapsing economically.
This quote is obviously meant to convey some sort of wisdom from the Emir, but it doesn't ring true. That anyone beyond the grand son of a hyper-rich individual will be back to square one out of sheer inevitability is a laughable idea.
Even if your wealth comes from a business that is only temporarily viable, your wealth will persist even if the underlying business does not, if it's conservatively invested. Additionally, rich people have no problem moving around in the world, so there's no need for the "petro-millionares" to remain in a country that is collapsing economically.
This quote is obviously meant to convey some sort of wisdom from the Emir, but it doesn't ring true. That anyone beyond the grand son of a hyper-rich individual will be back to square one out of sheer inevitability is a laughable idea.
It seems to me to be expressing a point about the nation in general. Sure, he and his family are probably fine for generations. It makes a lot more sense when applied as a trend for the average citizen of the nation.
That's my point though, it makes the quote even more disingenuous when you consider the fact that despite using himself as a metaphor for the country, the issue he's describing will not, in fact, affect himself.
I recall that quote.
Sadly, while prescient that quote is - he still is (has?) done nothing to mitigate its reality?
Sadly, while prescient that quote is - he still is (has?) done nothing to mitigate its reality?
Dubai, as far as I've heard, has no oil left. It's tourism, finance and other industries unrelated. So in that sense haven't they?
Seems like Dubai has 4 billion barrels of reserves [0]. Not as much as they once did and much less than Abu Dhabi. But still quite a few years worth of oil left.
[0] https://en.wikipedia.org/wiki/Oil_reserves_in_the_United_Ara...
[0] https://en.wikipedia.org/wiki/Oil_reserves_in_the_United_Ara...
For the UAE overall crude oil makes up 28% of exports:
https://en.wikipedia.org/wiki/Economy_of_the_United_Arab_Emi...
and Refined petroleum 15%
If you want to see an Arab country that has run out of oil, look at Yemen.
https://en.wikipedia.org/wiki/Economy_of_the_United_Arab_Emi...
and Refined petroleum 15%
If you want to see an Arab country that has run out of oil, look at Yemen.
My understanding is that Yemen has lots of reserves at 8 billion barrels [0] but never really produced or imported.
So aren’t they a better example of never oil rather than once had oil?
[0] https://en.wikipedia.org/wiki/Economy_of_Yemen
So aren’t they a better example of never oil rather than once had oil?
[0] https://en.wikipedia.org/wiki/Economy_of_Yemen
and shipping, so much shipping
Well he died in 1990, so probably not much he can do. And it's safe to say it's not reality since he has many grandchildren in their 30s. Quotes like this seem to be more of a warning then predictive, and Dubai seems to be trying to diversify.
Meanwhile Eisenhower's warning on the military industrial complex has been ignored and seems to be coming true.
Meanwhile Eisenhower's warning on the military industrial complex has been ignored and seems to be coming true.
> to be coming true.
To be coming true? The production of military systems, like fighters and ships, has been spread across the states and counties for decades, to the point that Congress will stuff an unwanted system down the Pentagon's throat to ensure re-election in defense intense districts. And be up front about the reason why!
To be coming true? The production of military systems, like fighters and ships, has been spread across the states and counties for decades, to the point that Congress will stuff an unwanted system down the Pentagon's throat to ensure re-election in defense intense districts. And be up front about the reason why!
One of the things I've always wondered about when Arab countries run out of oil, and now with cheap oil, will it, at a macro level, result in lower Islamic terrorism or higher?
Argument for Lower : State sponsors, and rich individual sponsors will have fewer funds. There may be local revolutions resulting in more democratic governments.
Higher: There will be instability due to rising poverty with many people turning to radicalization and in many cases terrorism becoming the only way for poor people to support their families.
Argument for Lower : State sponsors, and rich individual sponsors will have fewer funds. There may be local revolutions resulting in more democratic governments.
Higher: There will be instability due to rising poverty with many people turning to radicalization and in many cases terrorism becoming the only way for poor people to support their families.
With all due respect, but this is overly simplistic thinking. You're implying that people in that region are somehow more predisposed to "terrorism" compared to people in other regions, and that due to instability, they will somehow turn to "terrorism" as the defacto way to support their families, putting aside their morals and ethics that prevent them from engaging in those actions to begin with. We've already seen what happened in the US at the slightest hint of instability (all the looting that took place in the past weeks, and in a bizarre manner, some by seemingly well off people as well).
Secondly, it's known that funding also comes from non-Arab countries, who have vested interest to see that region continue to be unstable, to further their own benefits.
Secondly, it's known that funding also comes from non-Arab countries, who have vested interest to see that region continue to be unstable, to further their own benefits.
It all comes down to how you ask the question. If you ask the question like this instead, the outcome is in my opinion slightly less up for interpretation:
Q: "What happens when a badly governed country, already ripe with corruption and tendencies of sectarianism and local warlords, loses its only real source of income and the economy collapses?"
> There may be local revolutions resulting in more democratic governments.
If we are to entertain this hypothesis, why has this not happened already in the general area? There have been plenty of chances, not only in the Middle East but also in war-torn countries in Africa. The answer in my mind is that armed forces are already concentrated in the hands of the corrupt, and in an environment where surplus is a generation away, power will corrupt the uncorrupted.
When state power collapses, the economy grinds to a halt and the most basic necessities of life can no longer be counted on, in a country that also already has armed para-military groups and tendencies toward sectarianism and warlord leadership, the outcome is predictable: it's civil war, and untold suffering.
Q: "What happens when a badly governed country, already ripe with corruption and tendencies of sectarianism and local warlords, loses its only real source of income and the economy collapses?"
> There may be local revolutions resulting in more democratic governments.
If we are to entertain this hypothesis, why has this not happened already in the general area? There have been plenty of chances, not only in the Middle East but also in war-torn countries in Africa. The answer in my mind is that armed forces are already concentrated in the hands of the corrupt, and in an environment where surplus is a generation away, power will corrupt the uncorrupted.
When state power collapses, the economy grinds to a halt and the most basic necessities of life can no longer be counted on, in a country that also already has armed para-military groups and tendencies toward sectarianism and warlord leadership, the outcome is predictable: it's civil war, and untold suffering.
terrorism is cheap
It seems like the Middle East is going to get a double whammy from climate change.
1. Their economies will be affected as the world moves to non-oil based energy.
2. Their land will become more uninhabitable as time goes on. Higher temperatures, less water, more sandstorms, etc. I've seen studies that say the Middle East will be completely uninhabitable by the end of the century so we should expect mass migration from there to other places.
They will need money to combat number 2, but they will have less of that because of number 1.
1. Their economies will be affected as the world moves to non-oil based energy.
2. Their land will become more uninhabitable as time goes on. Higher temperatures, less water, more sandstorms, etc. I've seen studies that say the Middle East will be completely uninhabitable by the end of the century so we should expect mass migration from there to other places.
They will need money to combat number 2, but they will have less of that because of number 1.
80% of Dubai's food is imported, so can you label it already uninhabitable? Habitable is just a matter of how many resources you're willing to pump into making it so. With the holy sites in the middle east, it will remain populated for long to come.
You're right though, we'll see unprecedented mass migration. What's worse is the middle east has some of the highest birth rates in the world. With that excess population and constrained resources it is inevitable there will be continued conflict.
You're right though, we'll see unprecedented mass migration. What's worse is the middle east has some of the highest birth rates in the world. With that excess population and constrained resources it is inevitable there will be continued conflict.
Holy sites like Mecca only have tons of pilgrims during the Hajj. The rest of the year there could be a small maintenance population living on site.
3. During the cold war most middle-east countries sided with the USA. They were perceived as the allies. Now it's becoming increasingly harder for those countries to enjoy western support.
I thought this article was about the new UAE nuclear reactor. If anything I figured solar would be smarter for a hot sunny region. But dust, heat, and fragile panels (target for attack) may not be a good idea.
At least the UAE started construction when oil prices were high. I can't imagine a Gulf state starting a reactor program now with oil prices so low.
https://www.aljazeera.com/ajimpact/nuclear-gulf-experts-soun...
https://en.wikipedia.org/wiki/Barakah_nuclear_power_plant
At least the UAE started construction when oil prices were high. I can't imagine a Gulf state starting a reactor program now with oil prices so low.
https://www.aljazeera.com/ajimpact/nuclear-gulf-experts-soun...
https://en.wikipedia.org/wiki/Barakah_nuclear_power_plant
Nuclear reactors are also have the added capability of driving desalination plants with the waste heat.
On sorts of pain that have resulted: in 1985, Fahd opened the taps just when Gorbi was trying to reform the soviet economy. Successful reform was presumably made more difficult when one's principal export declines to a third (not helped by concurrent USD weakness) in real value.
https://en.wikipedia.org/wiki/1980s_oil_glut
https://en.wikipedia.org/wiki/1980s_oil_glut
I had a roommate from Saudi Arabia who said that their king have realized that a while ago and because they have basically infinite money, he started to develop small cities that have touristic potential, and people are being taught English too. In his words, they want to change this oil stereotype about their country, and that in ten years their country will be transformed.
I question how realistic it is for Saudi Arabia to turn into anything like the "tech hub" or "international finance center" or whatever of the area while simultaneously being an Islamist, conservative theocracy that is in many ways still judicially medieval.
Even if they pull it off, many people will think twice about coming there. Corruption, bigotry and a close-minded view of the world needs to go first.
Look at a country like Singapore: does anyone believe that they would be where they are today if they were an authoritarian regime that executed homosexuals and ordered the murder and dismemberment of dissidents abroad?
Even if they pull it off, many people will think twice about coming there. Corruption, bigotry and a close-minded view of the world needs to go first.
Look at a country like Singapore: does anyone believe that they would be where they are today if they were an authoritarian regime that executed homosexuals and ordered the murder and dismemberment of dissidents abroad?
I've lived in Singapore, and while it is generally a free society, its only pseudo democratic, and the government has placed various restrictions on political activities. Its no where near the level of Saudi Arabia, but there is a huge difference between traveling to Singapore for work/vacation and living there.
What does "being an Islamist theocracy" have anything to do against becoming a tech hub or finance center? They're not mutually exclusive in any way.
> executed homosexuals
Claims like this make it hard to take these comments seriously.
> executed homosexuals
Claims like this make it hard to take these comments seriously.
Exactly my point. The executions listed there were not done just for homosexuality, but were associated with other crimes including child molestation and murder.
One of those English speaking cities is Neom [0]. I think they want to build it into a tech/tourist planned city.
The Mediterranean and South East Asia is littered with these futuristic planned cities. I was anchored off the coast of Malta near this KSA financed "Smart City" [1]
[0] https://www.businessinsider.com/neom-what-we-know-saudi-arab... [1] http://smartcitymalta.com.mt
The Mediterranean and South East Asia is littered with these futuristic planned cities. I was anchored off the coast of Malta near this KSA financed "Smart City" [1]
[0] https://www.businessinsider.com/neom-what-we-know-saudi-arab... [1] http://smartcitymalta.com.mt
Unfortunately, tourism is the one major industry that is a non-starter right now.
These plans are more long-term than the next handful of months, so I don't think that's a consideration.
A city should last for centuries, at least, but it's hard to say if international tourism (as we know it) will recover within the next handful of months.
Worth appreciating the economic dynamic the article is based on: https://en.wikipedia.org/wiki/Resource_curse
Basic issue is that when a government can fund itself using resource extraction, it does not need the consent of a nation of people who would otherwise make up a tax base, so they pay the army and police out of oil money to keep them in power, and the average citizen is reduced to a subject. Trouble is, if all you need for power is control of the resources, it's not like you need to spend on winning hearts and minds when you can seize the resources with a relatively small rebel group. Given the high stakes of oil/resource billions and the very low bar to entry for cheap rebellions to seize them, these incentives are a recipe for the political shit shows we tend to associate with some resource cursed economies.
The predictable effect of oil price collapse is that leaders can no longer guarantee those payouts to the people who keep them in power, and as a result, those people will replace them with someone who can keep paying them. This is described in the DeMesquita-based idea of the "Rules for Rulers" video (https://youtu.be/rStL7niR7gs), which is related to the article's closing line about leaders getting their peoples consent.
The "Arab World," is a diverse place with a variety of multilateral interests so there are more dimensions to the outcomes than this, but the most obvious risk is that China will prop up whoever they can control in exchange for oil, and the mid-east will become the field for an China/US proxy war. The next risk is that unfortunately, if Arab leaders are reduced to winning hearts and minds to stay in power, they may do it with appeals to religious radicalism instead of democracy, which will bring about another era of state sponsored terrorism, that again, invites war.
Nice that we're using less oil which is good for the planet, but there is the small matter in the interim of what is good for humanity. The people who lose in these conflicts are never the participants, but the ones caught between them. These people will form new waves of refugees from the conflicts that can bring additional instability.
The precise knock-on effects of an oil price collapse can't be predicted, but you can anticipate the change in downstream volatility, and find a way to become indispensable in volatile times.
Basic issue is that when a government can fund itself using resource extraction, it does not need the consent of a nation of people who would otherwise make up a tax base, so they pay the army and police out of oil money to keep them in power, and the average citizen is reduced to a subject. Trouble is, if all you need for power is control of the resources, it's not like you need to spend on winning hearts and minds when you can seize the resources with a relatively small rebel group. Given the high stakes of oil/resource billions and the very low bar to entry for cheap rebellions to seize them, these incentives are a recipe for the political shit shows we tend to associate with some resource cursed economies.
The predictable effect of oil price collapse is that leaders can no longer guarantee those payouts to the people who keep them in power, and as a result, those people will replace them with someone who can keep paying them. This is described in the DeMesquita-based idea of the "Rules for Rulers" video (https://youtu.be/rStL7niR7gs), which is related to the article's closing line about leaders getting their peoples consent.
The "Arab World," is a diverse place with a variety of multilateral interests so there are more dimensions to the outcomes than this, but the most obvious risk is that China will prop up whoever they can control in exchange for oil, and the mid-east will become the field for an China/US proxy war. The next risk is that unfortunately, if Arab leaders are reduced to winning hearts and minds to stay in power, they may do it with appeals to religious radicalism instead of democracy, which will bring about another era of state sponsored terrorism, that again, invites war.
Nice that we're using less oil which is good for the planet, but there is the small matter in the interim of what is good for humanity. The people who lose in these conflicts are never the participants, but the ones caught between them. These people will form new waves of refugees from the conflicts that can bring additional instability.
The precise knock-on effects of an oil price collapse can't be predicted, but you can anticipate the change in downstream volatility, and find a way to become indispensable in volatile times.
It is a lot easier to win the hearts of the people when you don't have to tax them to give them whatever will interest them.
It’s hard to feel bad for them but there are a lot of outcomes here which result in a lot of people dying. Pretty sure half the reason SA and friends promote violent, reactionary interpretations of Islam is to serve as a dead man’s switch in case of regime change.
Oil is basically what made the middle east a violent and reactionary place.
Natural resources dominating the economy drives conflict and economic clusterfucks in all but the richest, most stable democracies (i.e. everywhere except Norway).
Oil's decline in importance might be the only way to escape this cycle (even if it will probably lead to bloodshed first).
Natural resources dominating the economy drives conflict and economic clusterfucks in all but the richest, most stable democracies (i.e. everywhere except Norway).
Oil's decline in importance might be the only way to escape this cycle (even if it will probably lead to bloodshed first).
Oil would only have been a thing maybe after 1890's or so.
It's been violent and reactionary for centuries.
The natural resource that drove the Romans and Greeks, and later Europe to colonize that region was: trade routes.
Frankly; Turkey, Persia, and Egypt have also been at each other's throats over regional dominance for centuries.
It's been violent and reactionary for centuries.
The natural resource that drove the Romans and Greeks, and later Europe to colonize that region was: trade routes.
Frankly; Turkey, Persia, and Egypt have also been at each other's throats over regional dominance for centuries.
Pretty much the whole world was violent and reactionary before 1890.
Egypt fought the Europeans. Egypt fought the Romans. Egypt fought the Asyrian Empire.
The middle-east has been a powerhouse since before Europe was a thing. They have been fighting each other for tens of millenniums.
I don't think oil was that big a factor before WWI though. You have to remember that until cars come along the entire industrial revolution is powered by coal and the UK had plenty of coal. Oil only becomes important after the first world war -- at the same time the Ottoman Empire that had ruled most of the middle-east is broken up, so you have a bunch of new countries with new civil infrastructure getting massively wealthy from a seemingly endless gift from the group - and all of those countries are ruled by tribal people and strongmen, if only because they were set up that way by the British and French.
The middle-east has been a powerhouse since before Europe was a thing. They have been fighting each other for tens of millenniums.
I don't think oil was that big a factor before WWI though. You have to remember that until cars come along the entire industrial revolution is powered by coal and the UK had plenty of coal. Oil only becomes important after the first world war -- at the same time the Ottoman Empire that had ruled most of the middle-east is broken up, so you have a bunch of new countries with new civil infrastructure getting massively wealthy from a seemingly endless gift from the group - and all of those countries are ruled by tribal people and strongmen, if only because they were set up that way by the British and French.
> Oil is basically what made the middle east a violent and reactionary place.
So, the Arab conquest after the 600s was not violent and reactionary?
So, the Arab conquest after the 600s was not violent and reactionary?
It is easy to feel bad for the citizens who don't really get a say in the matter and live under a repressive regime.
Pretty sure half the reason SA and friends promote violent, reactionary interpretations of Islam...
Is that a common abbreviation for Saudi? We used to use KSA when I lived there, but I don't trust South Africans not to be violent either. ;)
Is that a common abbreviation for Saudi? We used to use KSA when I lived there, but I don't trust South Africans not to be violent either. ;)
SA is actually the ISO-3166 abbreviation for Saudi Arabia, South Africa is "ZA". Perhaps not the widely used abbreviation for South Africa, but using "SA" for Saudi Arabia probably isn't incorrect.
I spent a month in Antibes (next to Cannes) visiting new in-laws. The French Riviera is a playground for the hundreds (thousands?) of saudi princes. I've never seen so many mega yachts, Rolls Royces, and Lambos in one place. To be honest, it was (briefly) kinda cool to see ultra-wealth on display, despite the consequences to millions of poor who suffer for it.
This is an unintended consequence (?) of the US' increase in fracking, starting circa 2005 or so. With oil being so ubiquitous within the (ailing) economy, cheap fuel was a proxy for lowing interest rates; which were already rock bottom.
The benefit then was it hurt Russia, Venezuela, and Iran. The pamademic has taken it a step further. I guess the question is: can the USA bail out SA and associates? Does the US have the political will and the capital to do so? If not, then what?
p.s. Keep in mind the first foreign country the current POTUS visited was SA. It seemed like an odd choice. Maybe not?
The benefit then was it hurt Russia, Venezuela, and Iran. The pamademic has taken it a step further. I guess the question is: can the USA bail out SA and associates? Does the US have the political will and the capital to do so? If not, then what?
p.s. Keep in mind the first foreign country the current POTUS visited was SA. It seemed like an odd choice. Maybe not?
I mean, how is this different from any other industry in the world? If you have a set of exports, if someone out competes you and lowers the prices, you suffer. That is why you diversify and build other economies. These petro states made a ton of money, most of the times squeezing desperate countries and selling them oil at above market rates. Should've saved for a rainy day, because sooner or later, other countries are going to figure a way out to cut you off.
I'm not going to defend Dubai but regarding oil being dominant to the economy.
https://en.wikipedia.org/wiki/Economy_of_Dubai
Oil production, which once accounted for 50 percent of Dubai's gross domestic product, contributes less than 1 percent to GDP today.
https://en.wikipedia.org/wiki/Economy_of_Dubai
Oil production, which once accounted for 50 percent of Dubai's gross domestic product, contributes less than 1 percent to GDP today.
So is investing in construction the solution for all petro countries?
Incidentally, this situation ended up being the nail in the coffin for the Soviet Union. The Soviets had been forced to import a lot of grain in the eighties and they were paying for it with oil exports, since that was really the only export that the west was interested in buying from the Soviets.
When oil crashed in the mid eighties, the Soviets were forced to look for hard currency loans from the west to keep up food imports. These loans were then tacitly conditioned on the Soviets behaving themselves in Eastern Europe. When the Solidarity protests started up in Poland and the Monday demonstrations started in East Germany, the normal Soviet response (as in 1956 and 1968) to roll tanks was not an option, because it would have meant no more loans, no more grain, and the starvation of the Soviet population.
When oil crashed in the mid eighties, the Soviets were forced to look for hard currency loans from the west to keep up food imports. These loans were then tacitly conditioned on the Soviets behaving themselves in Eastern Europe. When the Solidarity protests started up in Poland and the Monday demonstrations started in East Germany, the normal Soviet response (as in 1956 and 1968) to roll tanks was not an option, because it would have meant no more loans, no more grain, and the starvation of the Soviet population.
Who was making the loans to the Soviets specifically? For all the hard rhetoric of the 80s, it's quite interesting that the West was willing to prop up a (Communist!!!) entity for a fee.
This is a good summary:
https://apps.dtic.mil/dtic/tr/fulltext/u2/a254728.pdf
"In retrospect, it is possible to see that bank confidence had begun to erode as early as the latter part of 1988. In the fall of that year, new patterns of bank lending to the Soviet Union appeared. Previously, it was typical for banks from many nations to participate in syndications for loans to the Soviet Union. Beginning in October 1988, though, a number of very large loans were negotiated with purely national syndications-that is, all participating banks were from a single Western country. Western governments played important roles in arranging these syndications, and usually the loans were to finance exports from the lending country. At the time, a number of Western governments were intent on providing material support for the processes of economic and political reform perceived to be under way in the Soviet Union. By intervening with banks on behalf of the Soviet Union-either directly through loan guarantees or through less formal encouragement of bank lending-these governments probably helped the Soviet Union to achieve better terms from the banks than it could have gotten on its own. By mid-1990, bank confidence had declined sufficiently that banks would lend to the Soviet Union only with explicit guarantees from Western governments."
To answer your question though, I believe it was primarily Western European countries providing or guaranteeing the funds by 1989.
At the time, Gorbachev was seen as a reformer, and the West was willing to grant him some rope in the form of hard currency loans, but that would have evaporated if he had pulled a Prague in Warsaw or East Berlin.
https://apps.dtic.mil/dtic/tr/fulltext/u2/a254728.pdf
"In retrospect, it is possible to see that bank confidence had begun to erode as early as the latter part of 1988. In the fall of that year, new patterns of bank lending to the Soviet Union appeared. Previously, it was typical for banks from many nations to participate in syndications for loans to the Soviet Union. Beginning in October 1988, though, a number of very large loans were negotiated with purely national syndications-that is, all participating banks were from a single Western country. Western governments played important roles in arranging these syndications, and usually the loans were to finance exports from the lending country. At the time, a number of Western governments were intent on providing material support for the processes of economic and political reform perceived to be under way in the Soviet Union. By intervening with banks on behalf of the Soviet Union-either directly through loan guarantees or through less formal encouragement of bank lending-these governments probably helped the Soviet Union to achieve better terms from the banks than it could have gotten on its own. By mid-1990, bank confidence had declined sufficiently that banks would lend to the Soviet Union only with explicit guarantees from Western governments."
To answer your question though, I believe it was primarily Western European countries providing or guaranteeing the funds by 1989.
At the time, Gorbachev was seen as a reformer, and the West was willing to grant him some rope in the form of hard currency loans, but that would have evaporated if he had pulled a Prague in Warsaw or East Berlin.
Thanks very much :) Sounds kind of similar to the loans made to Yugoslavia, which were made with lots of formally defined stipulations.
We also have to consider the Yeltsin and Clinton relationship compared to the Reagan/Bush ones
We also have to consider the Yeltsin and Clinton relationship compared to the Reagan/Bush ones
Some of these countries has so much time to prepare for the future, while others were busy being railed by theocracies propped up by foreign influences in order to keep exploiting them for their oil. The later are being dropped like hot potatoes by their foreign influences and the former have taken action way, way, waaay too late.
The shallow pro market idealism that too often colors the Economist's analysis is hard to swallow. Give me the confidence to pronounce: 'If Arab rulers want citizens to pay their way, they will need to start earning their consent' in a complex and unstable region. As thou they can see the consequences of complex change. The ghosts of the dead in Libya, Syria and Egypt (remember that brief flame of democracy) should be a constant presence in the author's mind.
Not exactly sure your critique (maybe I'm misunderstanding?). The gist I get from the article is that many Arab states have dependend on oil to stablize their economies/internal politics and fund their way of life, and that while some of these states had plans to diversify the current cheap oil makes the execution of that plan more complicated. In addition (something I learned from this article) the economies in the region are connected in ways which may make possibile instability amplified due to migrant workers/tourism.
The quote you picked out might not be a great take, but I think it's referring to the potential large (and growing) gap between the ruling class and normal citizens which could seed dissent.
The quote you picked out might not be a great take, but I think it's referring to the potential large (and growing) gap between the ruling class and normal citizens which could seed dissent.
The critique is that the Economist has a single solution to all complex problems and is confident to wave that wand even thou the reality - in most such transitions - is enormous, disastrous instability and war. It utterly ignores the hand of empire in the affairs of the petro states and their repeated failed interventions to prop up the leaders that fake democratic reform while chopping up journalists.
It is analysis governed by imagination and thus is hardly worth detailed consideration.
It is analysis governed by imagination and thus is hardly worth detailed consideration.
Eh, what do expect from the Economist? They write as if they just read something about the topic and now after 2 paragraphs came to the conclusion on how the world should be updated. That's their style.
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The Crown Prince of Saudi Arabia and SoftBank have invested in the largest solar project in history. MBS is no dummy.
https://www.cnbc.com/2018/03/27/softbank-and-saudi-arabia-an...
https://www.cnbc.com/2018/03/27/softbank-and-saudi-arabia-an...
A lot of the evil in this world comes from nasty regimes that own oil fields. Half the middle east, Russia, Venezuela. I'll give Canada a pass.
If that unearned funding source dies out, I think it can only be good for human freedom and, at least longer term, peace.
If that unearned funding source dies out, I think it can only be good for human freedom and, at least longer term, peace.
then. . . why did the Arab states (Saudi Arabia) join with Russia to overproduce and sandbag prices?
To bankrupt and slow down other oil producing countries that have even higher costs.
As an example, take a look at Alberta, Canada, with its giant oil sands projects -- on the world's largest deposit of crude oil on the planet -- basically unprofitable now.
As an example, take a look at Alberta, Canada, with its giant oil sands projects -- on the world's largest deposit of crude oil on the planet -- basically unprofitable now.
I think that is true to an extent, as far as international politics goes. Saudi Arabia is happy to make that move to target say Iran, etc.
But things like oil sands and etc won't go away. It's accessible and the boom and bust nature of oil is just part of the system. They don't really stop oil sands.. just pause them.
Someone goes bankrupt today, someone else will sell that oil when the price goes back up. And if the price never goes back up then even Saudi Arabia is in trouble...
But things like oil sands and etc won't go away. It's accessible and the boom and bust nature of oil is just part of the system. They don't really stop oil sands.. just pause them.
Someone goes bankrupt today, someone else will sell that oil when the price goes back up. And if the price never goes back up then even Saudi Arabia is in trouble...
What if you believe or know that the environmental regulatory environment for fossil fuel extraction is bound to change, or has to change? Say, due to climate change?
Wouldn't you want to at least temporarily stop your competitors from profiting from the last couple decades of massive unregulated oil sales, and at the same time try to dump as much of your product as you could?
Wouldn't you want to at least temporarily stop your competitors from profiting from the last couple decades of massive unregulated oil sales, and at the same time try to dump as much of your product as you could?
I'm not sure Saudi Arabia is willing to sit on theses low prices for decades.
Reg pressure on oil could hurt them too...
Generally speaking the oil available now will be in the future if prices rise again. The technology to access oil has made it easier to get to, not harder.
Reg pressure on oil could hurt them too...
Generally speaking the oil available now will be in the future if prices rise again. The technology to access oil has made it easier to get to, not harder.
> The region’s energy exporters are expected to earn about half as much oil revenue this year as they did in 2019
I could only read to this point due to the paywall, but US sanctions halved Iranian oil exports from 2017 -> 2019 [0] as well. Goes to show the significance of the sanctions.
[0] https://www.bbc.com/news/world-middle-east-48119109
I could only read to this point due to the paywall, but US sanctions halved Iranian oil exports from 2017 -> 2019 [0] as well. Goes to show the significance of the sanctions.
[0] https://www.bbc.com/news/world-middle-east-48119109
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Registration wall. Ugh.
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I feel like this might go the other direction once the lockdowns end and once people realize a huge chunk of their "green" energy labeled as biomass is actually just burning down trees.
Even if you use the fast growing forests used for paper in places like Oregon, there is still petroleum used in planting, cutting and fertilizing biofuel forests. In many ways, it's even worse for the environment than just burning the oil directly.
Baring some massive breakthrough in fusion, society as a whole needs to consume less energy, purchase less stuff and make durable goods that last a lot longer (a cellphone should last 8 years, not 3). Mass consumption is going to kill our environment a lot faster than energy consumption or CO2 emissions. CO2 pales in comparison to the ecological devastation in Chinese factory cities, the large amount of plastic particulates/trash in our oceans and completely unsustainable economic doctrine of infinite growth.
Even if you use the fast growing forests used for paper in places like Oregon, there is still petroleum used in planting, cutting and fertilizing biofuel forests. In many ways, it's even worse for the environment than just burning the oil directly.
Baring some massive breakthrough in fusion, society as a whole needs to consume less energy, purchase less stuff and make durable goods that last a lot longer (a cellphone should last 8 years, not 3). Mass consumption is going to kill our environment a lot faster than energy consumption or CO2 emissions. CO2 pales in comparison to the ecological devastation in Chinese factory cities, the large amount of plastic particulates/trash in our oceans and completely unsustainable economic doctrine of infinite growth.
The end of your comment makes some sense. The beginning is a puzzle. Who's using biomass? It's <1.5% of energy generation in the US -- you're pretty special and living in an unusual place if you get any substantial energy from that source.
Biomass is over 40% of Europe's "renewable" energy.
Edit: see this for numbers: https://www.vox.com/science-and-health/2019/3/4/18216045/ren...
Edit: see this for numbers: https://www.vox.com/science-and-health/2019/3/4/18216045/ren...
So, yes, "you're pretty special and living in an unusual place"
It's over 10% of renewables in the US. So not that unusual.
I was referring to Europe. Right now Europe looks like a paradise compared to the US.
Up to 5% of car fuel in the UK https://en.wikipedia.org/wiki/Renewable_Transport_Fuel_Oblig...
Biofuel is a small industry. But the big difference is it's carbon neutral because the carbon released into the atmosphere came from the atmosphere.
Oil is releasing carbon from prehistoric atmospheres.
Oil is releasing carbon from prehistoric atmospheres.
Actually it is tax neutral, not carbon neutral. The kicker here is (i cant find the source anymore) at least in Germany agriculture is energy intensive. It seems one energy unit of crop need one energie unit of (tax excempted) fossil fuel (for the machineries).
So basically you are pumping fuel into a black box, and out comes bioful (which has tax breaks as well, if I remember correctly)
It is a left picket right pocket game.
So basically you are pumping fuel into a black box, and out comes bioful (which has tax breaks as well, if I remember correctly)
It is a left picket right pocket game.
That's true, one must also account for the carbon footprint of the inputs. Of course oil extraction and refining also has a carbon footprint.
It's a problem that could be solved over time if using green energy for the agriculture.
It's a problem that could be solved over time if using green energy for the agriculture.
> CO2 pales in comparison to the ecological devastation in Chinese factory cities, the large amount of plastic particulates/trash in our oceans and completely unsustainable economic doctrine of infinite growth.
No... not remotely. While these things you mention are a big threat, and truly terrible disasters themselves, they pale in comparison to the planet changing disaster that is Climate Change.
No... not remotely. While these things you mention are a big threat, and truly terrible disasters themselves, they pale in comparison to the planet changing disaster that is Climate Change.
> a huge chunk of their "green" energy labeled as biomass is actually just burning down trees.
Nearly all it comes from some variety of grass. Be it corn, sugar cane or some foraging grass. Trees are way too inefficient to be practical.
Nearly all it comes from some variety of grass. Be it corn, sugar cane or some foraging grass. Trees are way too inefficient to be practical.
> In many ways, it's even worse for the environment than just burning the oil directly.
This seems like a testable claim. Is there research about this subject that could confirm or debunk this claim?
This seems like a testable claim. Is there research about this subject that could confirm or debunk this claim?
Only napkin math. The typical sources of climate change denial don't see biomass as a threat (Because it is tiny, growing slowly, and augments fossil fuels, not replaces them), so they don't fund any research to attack it.
The proponents of it probably know that its numbers don't look great, so they don't push for research that thoroughly audits it.
It's also difficult to thoroughly audit the carbon costs of a complex supply chain that has to move tens and hundreds of millions tonnes of lumber - when the costs greatly vary based on how the lumber was sourced.
The proponents of it probably know that its numbers don't look great, so they don't push for research that thoroughly audits it.
It's also difficult to thoroughly audit the carbon costs of a complex supply chain that has to move tens and hundreds of millions tonnes of lumber - when the costs greatly vary based on how the lumber was sourced.
It can be tested in the other direction too: is there research that can confirm or debunk the opposite claim?
to confirm one is to debunk the other of course.
Biomass only makes up a small fraction of the energy economy. Wind and solar have much more promising futures.
https://news.ycombinator.com/item?id=23869858