Free fall in global oil prices has adversely affected the global economy. The crude plunge to under $30 a barrel in February from above $100 two years ago. Countries in the Middle East were badly hit by the slumping prices. However, it is heartening to note that the oil prices have started to move up and are hovering between over $50 and $48.98 a barrel.
It is attributed to unrest in the Nigerian oil regions, ongoing reforms in some Middle Eastern oil facilities and the ongoing conflicts in Libya, Yemen, Syria and Iraq. However, the price may decline again this year. The implications and risks concern us all.
The nightmare of cheap oil began with the extraction of shale oil in economic quantities, and increasing its competitive share in the market to a point that made the United States an oil exporter. Consequently, for the first time we felt a serious threat in decades.
This is not limited to the Gulf countries but includes countries such as Egypt, which depends on oil sales and remittances from its citizens in oil-producing countries. Countries that do not have oil partly rely on selling products to oil-producing countries, labor remittances or financial aid. The situation in the Gulf countries is the most difficult, because they do not currently have alternatives.
They are afraid because of the rapid decline in oil prices that was accompanied by the cancelation of many government projects, the slowdown in payments for contracting companies and reduced payments to employees. On the one hand this created a pessimistic climate, but on the other it led many to accept the idea of economic change, reducing dependence on oil and cutting subsidies on goods and services.
The price rise is not meant to renew our addiction or stall economic reform, because $50-$70 per barrel will not be enough to pay government expenses and the fiscal deficit. Sadly, the price rise will result in increased war funding in the region. Oil itself is a cause of conflict. Without a collective, careful policy to avoid war, all that the region will earn from oil will be spent on war.
Can a country such as Iran be convinced? Its nuclear deal and economic openness are worthless if it is determined to increase spending on war and militias in the region. Despite rising oil prices and the openness of world markets to Iran’s oil, it will not be enough if it does not change its understanding of the world around it.
It is attributed to unrest in the Nigerian oil regions, ongoing reforms in some Middle Eastern oil facilities and the ongoing conflicts in Libya, Yemen, Syria and Iraq. However, the price may decline again this year. The implications and risks concern us all.
The nightmare of cheap oil began with the extraction of shale oil in economic quantities, and increasing its competitive share in the market to a point that made the United States an oil exporter. Consequently, for the first time we felt a serious threat in decades.
This is not limited to the Gulf countries but includes countries such as Egypt, which depends on oil sales and remittances from its citizens in oil-producing countries. Countries that do not have oil partly rely on selling products to oil-producing countries, labor remittances or financial aid. The situation in the Gulf countries is the most difficult, because they do not currently have alternatives.
They are afraid because of the rapid decline in oil prices that was accompanied by the cancelation of many government projects, the slowdown in payments for contracting companies and reduced payments to employees. On the one hand this created a pessimistic climate, but on the other it led many to accept the idea of economic change, reducing dependence on oil and cutting subsidies on goods and services.
The price rise is not meant to renew our addiction or stall economic reform, because $50-$70 per barrel will not be enough to pay government expenses and the fiscal deficit. Sadly, the price rise will result in increased war funding in the region. Oil itself is a cause of conflict. Without a collective, careful policy to avoid war, all that the region will earn from oil will be spent on war.
Can a country such as Iran be convinced? Its nuclear deal and economic openness are worthless if it is determined to increase spending on war and militias in the region. Despite rising oil prices and the openness of world markets to Iran’s oil, it will not be enough if it does not change its understanding of the world around it.
