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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

#41

Post by jariel »

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…

" 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.

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

#42

Post by jeffreyrogers »

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,…

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.

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

#43

Post by Pokepokalypse »

pydry wrote: post #11
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.

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.

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

#44

Post by solotronics »

pydry wrote: post #26
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…

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…

They should vertically integrate while they can. Produce exportable goods and materials with the oil.

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

#45

Post by chiefalchemist »

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?

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

#46

Post by ogre_codes »

guepe wrote: post #37
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,…

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.

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

#47

Post by dodobirdlord »

pydry wrote: post #26
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…

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 capability level of the country before the wheels fall off.

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

#48

Post by jeffreyrogers »

supernova87a wrote: post #12
djsumdog wrote: post #10

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…

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...

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