With oil cheap, Arab states cannot balance their books • Hacker News Board

Re: With oil cheap, Arab states cannot balance their books

#101

Post by coliveira » Tue, Jul 21, 2020, 5:46 PM UTC

marcosdumay wrote: post #53

pydry wrote: post #26

Earlier quoted context omitted.

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 probl…

> 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-simp…

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.

Re: With oil cheap, Arab states cannot balance their books

#102

Post by hnarn » Tue, Jul 21, 2020, 5:46 PM UTC

cs02rm0 wrote: post #23

opportune wrote: post #4

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.

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. ;)

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.

Re: With oil cheap, Arab states cannot balance their books

#103

Post by hinkley » Tue, Jul 21, 2020, 5:47 PM UTC

ogre_codes wrote: post #79

drocer88 wrote: post #65

Earlier quoted context omitted.

"The point here is that sub $40 oil is becoming the new norm" 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.

Re: With oil cheap, Arab states cannot balance their books

#104

Post by tazjin » Tue, Jul 21, 2020, 5:47 PM UTC

Apocryphon wrote: post #86

yardie wrote: post #78

Earlier quoted context omitted.

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

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.

Re: With oil cheap, Arab states cannot balance their books

#105

Post by vbezhenar » Tue, Jul 21, 2020, 5:49 PM UTC

ogre_codes wrote: post #28

supernova87a wrote: post #7

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 littl…

> 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,…

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.

Re: With oil cheap, Arab states cannot balance their books

#106

Post by hinkley » Tue, Jul 21, 2020, 5:50 PM UTC

jeffreyrogers wrote: post #42

ogre_codes wrote: post #28

Earlier quoted context omitted.

> 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,…

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…

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.

Re: With oil cheap, Arab states cannot balance their books

#107

Post by BurningFrog » Tue, Jul 21, 2020, 5:50 PM UTC

Pokepokalypse wrote: post #43

pydry wrote: post #11

Earlier quoted context omitted.

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).

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.

Pretty much the whole world was violent and reactionary before 1890.

Re: With oil cheap, Arab states cannot balance their books

#108

Post by Apocryphon » Tue, Jul 21, 2020, 5:50 PM UTC

tazjin wrote: post #104

Apocryphon wrote: post #86

Earlier quoted context omitted.

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.

Re: With oil cheap, Arab states cannot balance their books

#109

Post by SaltyLemonZest » Tue, Jul 21, 2020, 5:51 PM UTC

dodobirdlord wrote: post #47

pydry wrote: post #26

Earlier quoted context omitted.

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 probl…

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 capa…

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.

Re: With oil cheap, Arab states cannot balance their books

#110

Post by travisporter » Tue, Jul 21, 2020, 5:51 PM UTC

dingoegret wrote: post #81

jeffreyrogers wrote: post #42

Earlier quoted context omitted.

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…

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.

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.