Posted on Aug 25, 2015
Will the drop in oil prices lead to greater global unrest?
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Oil, the lifeblood of many countries that produce and sell it, appears to be rapidly turning into an ever-cheaper economic curse.
A year ago, the international price per barrel of oil was about $103. By Monday, the price was about $42, roughly 6 percent lower than on Friday.
In oil-endowed Iraq, where an Islamic State insurgency and fractious sectarian politics are growing threats, a new source of instability erupted this month with violent protests over the government’s failure to provide reliable electricity and explain what has been done with all the promised petroleum money. In Russia, a leading oil producer, consumers are now paying far more for imports, largely because of their currency’s plummeting value. In Nigeria and Venezuela, which rely almost completely on oil exports, fears of unrest and economic instability are building. In Ecuador, where oil revenue has fallen by nearly half since last year, tens of thousands of demonstrators pour into the streets every week, angered by the government’s economic policies.
Even in wealthy Saudi Arabia, where the ruling family spends oil money lavishly to preserve its legitimacy, the government has been burning through roughly $10 billion a month in foreign exchange holdings to help pay expenses, and it is borrowing in the financial markets for the first time since 2007. Other Arab countries in the Persian Gulf that are dependent on oil exports, including Kuwait, Oman and Bahrain, are facing fiscal deficits for the first time in two decades.
Read more at ...
http://www.msn.com/en-us/news/world/from-venezuela-to-iraq-to-russia-oil-price-drops-raise-fears-of-unrest/ar-BBm4po7
A year ago, the international price per barrel of oil was about $103. By Monday, the price was about $42, roughly 6 percent lower than on Friday.
In oil-endowed Iraq, where an Islamic State insurgency and fractious sectarian politics are growing threats, a new source of instability erupted this month with violent protests over the government’s failure to provide reliable electricity and explain what has been done with all the promised petroleum money. In Russia, a leading oil producer, consumers are now paying far more for imports, largely because of their currency’s plummeting value. In Nigeria and Venezuela, which rely almost completely on oil exports, fears of unrest and economic instability are building. In Ecuador, where oil revenue has fallen by nearly half since last year, tens of thousands of demonstrators pour into the streets every week, angered by the government’s economic policies.
Even in wealthy Saudi Arabia, where the ruling family spends oil money lavishly to preserve its legitimacy, the government has been burning through roughly $10 billion a month in foreign exchange holdings to help pay expenses, and it is borrowing in the financial markets for the first time since 2007. Other Arab countries in the Persian Gulf that are dependent on oil exports, including Kuwait, Oman and Bahrain, are facing fiscal deficits for the first time in two decades.
Read more at ...
http://www.msn.com/en-us/news/world/from-venezuela-to-iraq-to-russia-oil-price-drops-raise-fears-of-unrest/ar-BBm4po7
Oil
Economics
Warfare
Posted >1 y ago
Responses: 16
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My first thought is always joy at lower oil prices, but you're right there is a much larger, more complex impact.
Dropping oil prices historically has only happened with relative peace in the middle east, but with the diversification of sources of oil, including domestically in the US, this doesn't seem to be the case.
To a certain extent this could be good for nations that rely on oil for their livelihood in the middle east. I know that seems counter intuitive, but the change from reliance on oil may (slowly) change the culture in some of these nations and force them to cooperate better with each other and the international community.
Dropping oil prices historically has only happened with relative peace in the middle east, but with the diversification of sources of oil, including domestically in the US, this doesn't seem to be the case.
To a certain extent this could be good for nations that rely on oil for their livelihood in the middle east. I know that seems counter intuitive, but the change from reliance on oil may (slowly) change the culture in some of these nations and force them to cooperate better with each other and the international community.
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MCPO Roger Collins
Sgt Tom Cunnally - Perhaps this will better define what global unrest is and how I understand it. http://www.theguardian.com/world/2012/jan/03/how-the-revolution-went-viral
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LCDR (Join to see)
There are definitely significant second, third, and fourth order affects. Destabilizing a country we are at odds with seems good at first glance, until the ramifications are realized down the road. Ironically, stable enemies are better than unstable ones.
Sgt Tom Cunnally MCPO Roger Collins GySgt Wayne A. Ekblad
Sgt Tom Cunnally MCPO Roger Collins GySgt Wayne A. Ekblad
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SSG Gerhard S.
We have more to fear from choking Federal regulation regarding oil prices than middle east unrest. Things like delaying or quashing the XL pipeline, and other regulatory speed bumps and road blocks that interfere with market forces. These lower prices, ARE good for consumers, but here in America, and in Canada where the oil has prefixes like "shale", "tar sand" and "off shore", and where labor, exploration, procurement, and regulatory costs are great, the threat of losing the ability to produce oil profitably becomes ever more problematic as prices drop. Operations will likely start shooting down as prices continue to drop, pricing much of our domestic and Northern neighbor's oil out of the market.
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I am hopeful that early in the next administration. oil refining capability will be increased in this nation as well as a welcoming back of clean coal and nuclear energy so that this nation will have a stable energy foundation GySgt Wayne A. Ekblad. That way those who have their own resources can experiment with alternative energy to their heart’s content without relying on the public trough of funding including tax credits.
COL Mikel J. Burroughs, LTC Stephen C., SGT (Join to see), SGT Forrest Stewart, SGT Randal Groover, SPC (Join to see)
COL Mikel J. Burroughs, LTC Stephen C., SGT (Join to see), SGT Forrest Stewart, SGT Randal Groover, SPC (Join to see)
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SSG (Join to see)
LTC Stephen F. - 33 cents in 1970 has the buying power of $7.87 today. Thank goodness gas prices are not that high. Gas in Tucson is $2.36 a gallon, that would be about 10 cents a gallon in 1970 money.
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LTC Stephen F.
SSG (Join to see) - I too am glad prices are relatively low for gas and waiting for the price of eggs and other things which must be shipped to go down again.:-)
the gas lines in the early 1970's were very long as people tried to find gas. The thing about supply and demand when unfettered by government price controls is that when the price hits a certain level the incentive to go to previously untapped oil fields which become economical to use - the net result is that because of technology and profit potential much petroleum is actually available that was predicted in 1972 when the "end of all available gas was near" primarily because of the dreaded OPEC, the after effect of the 1973 Arab-Israeli war, etc. :-)
While gas prices have gone down relatively speaking compared to 1972 dollars, automobile prices have kept pace with your example.
the gas lines in the early 1970's were very long as people tried to find gas. The thing about supply and demand when unfettered by government price controls is that when the price hits a certain level the incentive to go to previously untapped oil fields which become economical to use - the net result is that because of technology and profit potential much petroleum is actually available that was predicted in 1972 when the "end of all available gas was near" primarily because of the dreaded OPEC, the after effect of the 1973 Arab-Israeli war, etc. :-)
While gas prices have gone down relatively speaking compared to 1972 dollars, automobile prices have kept pace with your example.
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SSG (Join to see)
People always confused the end of really cheap oil with the end of oil. There are huge amounts of oil out there that are simply uneconomical to retrieve. As technology improves and drives the cost of retrieval downward, and demand pushes the price of oil upward more oil hits the market. Eventually lower oil prices will drive some of the more expensive oil off the market, however that could take a while since a lot of the cost of retrieving that oil has already been spent. Meanwhile in an effort to maintain a steady flow of income, many producers are flooding the market and driving the cost even lower.
I don't expect to see the price of most goods go down with lower gas prices unless there is intense competition in that industry. An item is only worth what someone is willing to pay for it, not what it cost for you to produce and bring the product to the consumer.
On a side note, the minimum wage in 1970 was $1.65, and 33 cent gas, cost the equivalent of $2.03 today. I must have got a hold of a bad inflation calculator yesterday.
I don't expect to see the price of most goods go down with lower gas prices unless there is intense competition in that industry. An item is only worth what someone is willing to pay for it, not what it cost for you to produce and bring the product to the consumer.
On a side note, the minimum wage in 1970 was $1.65, and 33 cent gas, cost the equivalent of $2.03 today. I must have got a hold of a bad inflation calculator yesterday.
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LTC Stephen F.
SSG (Join to see) - before I enlisted I was making roughly $1.65 in the early 1970's by working in a car wash at minimum wage. One dollar could go a lot further back then :-)
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The answer to your question is nuanced, and pretty much comes down to perspective.
For example, let's say you are the leader of a country whose economy is based upon oil.
If you are bent on adventurism, your plans get sidetracked. You simply don't have the resources to fuel your ambitions. You might not stop... in fact in select circumstances the use of proxies to create unrest and stir the markets is a time-tested strategy. Notice that Russia and Iran have been notably quieter than this time last year. Oil's decline and their more muted behavior are not coincidental.
If you are generally peaceful, the reduced revenue means that you cut back on the Emirate lifestyle a bit. Those people sit on mountains of money and will be just fine. Unfortunately, a large number buy and maintain their hold on power through oil-financed largesse. If the gravy train slows, people take notice. Then...
Let's say that you are Joe Citizen in an oil state. Leader guy says it is all the (West's, USA's, Israel's, Ukraine's, etc) fault. You get mad at the external enemy, and the ensuing resentment, steered safely away from the seat of power, gets directed in a direction that can be used. Iran and Venezuela have done this for decades, Russia less long.
Meanwhile, next door in the non-trouble-making emirate, the natives get restless. The police and military come out to keep order and the guilded palace from being looted. If the people are mad enough, they might just overthrow the ruler (see Iran, 1979), but it does not happen very often. More likely that new, motivated insurgencies are born. They will operate for a time, causing more or less harm to the people. Eventually they tend to lose their way and turn to criminal activity instead of the politically motivated stuff they still talk about to keep their men motivated.
From the macro-view, oil prices rising or falling has benefits and costs. What is ALWAYS true is volatility in the price causes chaos. That is why OPEC was formed in the first place, to try and keep prices stable.
For example, let's say you are the leader of a country whose economy is based upon oil.
If you are bent on adventurism, your plans get sidetracked. You simply don't have the resources to fuel your ambitions. You might not stop... in fact in select circumstances the use of proxies to create unrest and stir the markets is a time-tested strategy. Notice that Russia and Iran have been notably quieter than this time last year. Oil's decline and their more muted behavior are not coincidental.
If you are generally peaceful, the reduced revenue means that you cut back on the Emirate lifestyle a bit. Those people sit on mountains of money and will be just fine. Unfortunately, a large number buy and maintain their hold on power through oil-financed largesse. If the gravy train slows, people take notice. Then...
Let's say that you are Joe Citizen in an oil state. Leader guy says it is all the (West's, USA's, Israel's, Ukraine's, etc) fault. You get mad at the external enemy, and the ensuing resentment, steered safely away from the seat of power, gets directed in a direction that can be used. Iran and Venezuela have done this for decades, Russia less long.
Meanwhile, next door in the non-trouble-making emirate, the natives get restless. The police and military come out to keep order and the guilded palace from being looted. If the people are mad enough, they might just overthrow the ruler (see Iran, 1979), but it does not happen very often. More likely that new, motivated insurgencies are born. They will operate for a time, causing more or less harm to the people. Eventually they tend to lose their way and turn to criminal activity instead of the politically motivated stuff they still talk about to keep their men motivated.
From the macro-view, oil prices rising or falling has benefits and costs. What is ALWAYS true is volatility in the price causes chaos. That is why OPEC was formed in the first place, to try and keep prices stable.
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