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With oil cheap, Arab states cannot balance their books

economist.com

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

#141

Post by cameldrv »

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.

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

#142

Post by bluGill »

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.

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.

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

#143

Post by ogre_codes »

vbezhenar wrote: post #105
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,…

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 R…

> 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.

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

#144

Post by bluGill »

pydry wrote: post #100
Svip wrote: post #54

Earlier quoted context omitted.

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 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.

Your racist characterization of the far right detracts from your point.

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

#145

Post by hnarn »

ksk wrote: post #124
hnarn wrote: post #97

Earlier quoted context omitted.

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…

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.

I am aware Singapore is not a perfect democratic example but this derails the debate and is beside the point, which is that if Singapore had mirrored the oppressive nature of Saudi Arabia, it would never have succeeded.

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

#146

Post by Beatus »

bluGill wrote: post #137
giantrobot wrote: post #131

Earlier quoted context omitted.

Trains would like to have a word.

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.

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

#147

Post by ars »

Svip wrote: post #54
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…

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 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.

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

#148

Post by rconti »

vbezhenar wrote: post #105
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,…

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 R…

OPEC just doesn't have enough pricing power anymore.

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

#149

Post by sushshshsh »

cameldrv wrote: post #141

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 fo…

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.

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

#150

Post by AnimalMuppet »

Beatus wrote: post #146
bluGill wrote: post #137

Earlier quoted context omitted.

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.

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