Revival of Oil Prices

The best news so far this year is that oil prices have risen reaching $50 and few cents per barrel. Prices were expected to continue declining to around $20, thus expanding the economic crisis and shaking not only petroleum-exporting countries but also the region.

Moreover, this rise in the oil prices does not prevent a coming phase of economic pain, yet it has lifted spirits in drained markets.

Notably, recent rise in oil prices was attributed to unrest in the Nigerian oil regions, ongoing reforms in some Middle Eastern oil facilities – which have chosen the least costly time for reform – and ongoing conflict in Libya, Yemen, Syria and Iraq.

However, the price may decline again this year, if not for sure in coming years. Let us leave the analyzing and reading of the probabilities and possibilities for oil experts, its implications and risks do concern us all; whether we are concerned about the political or social matters.

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.

Accordingly, we felt for the first time a serious threat to the reality that we have been acquainted to for decades, which is the fact that region countries rely almost solely on oil; considering it their major source of life.

This is not only limited to the Gulf but also includes countries such as Egypt, which depends mainly on oil sales and transfer of funds from its citizens in oil-producing countries instead of relying on its agricultural or industrial exports.

For their part, countries that do not produce oil partly rely on selling products to oil-producing countries, receiving funds from citizens living and working in these countries, or accepting financial aids.

The situation in the Gulf countries is the most difficult because they do not have alternatives in the meantime.

Rapid decline in oil prices that was accompanied by the cancellation of many government projects and the slowdown in payments for contracting companies, which compelled them to reduce extra payments to their employees, let these countries fear of what is coming next.

On one hand, this created a pessimistic climate, and on the other hand it led many countries to accept the idea of economic change by reducing dependence on oil and cutting subsidies on goods and services.

This rise in oil prices does not mean we should revive our addiction to it. Fear from the fall of oil prices and concern regarding its future in the past six months led to unanimous consent for the economic reform and restructuring project. Thus, allowing the raise of oil, water, and electricity bills in Saudi Arabia.

Even if oil prices increase, it will not be enough for the future generations, which will be threatened by the scarce amount left for them.

I do not want to keep talking about the necessities of change, yet it is important to say that the good news about oil prices, even if it lasted for a long period, should not let countries stop the economic development process; taking into consideration the fact that this rise in prices is still low if compared to the past period as the $50-$70 per barrel is not enough to pay government expenses and the fiscal deficit.

On the political part, sadly, the rise in oil prices will result in an increase in war-funding in the region, thus causing an increase in unrest.

Oil itself is a cause of conflict and a fund for chaos and disorder. Without a collective and careful policy to avoid war, all what that the region will earn from oil will be spent on war.

Can a country such as Iran, which did not witness one prosperous era in its modern history, and which has never benefited from its oil resources due to war – be convinced?

Its nuclear deal and economic openness are worthless if it is determined to raise spending on war and funding 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.

Revival of Oil Prices