Editor in Chief: Moh. Reza Huwaida Sunday, January 21st, 2018

Oil and OPEC


Oil and OPEC

Day by day, the unsustainable- energy-exploiting universal economy becomes larger and larger, with no brake at the prospective. What happens? The answer as well as consequence is clear. Just put a glimpse to glamorous smiling of Organization of the Petroleum Exporting Countries (OPEC) members in political and economic night clubs! There everybody shakes ass and are drunk of windfall prosperity and wealth the black gold brought about. They are definitely sure that no engine would start without their permission and posses to strain economic condition if something goes wrong as happened in 1973. Yes, they can. Why not? Having almost 80 percent of all crude oil reserves; then who dares to tell them what to do and what not to?

Meanwhile, we are seeing fresher, endeavoring to join the same natural reserves-based ideology of economy—appreciate people to consume, do not save because saving is recognized a threat to booming economy. Presently what makes the world economy work is nothing except the ideology of consumption. The motto: "consume even beyond your actual ability and do not worry at all because the money will go to companies and enterprises and they will reinvest and employ more or raise the efficiency of employees, instantly heard. And the circulation would go on and bring wealth and prosperity."

To keep the process safe and protect the stability of the market, naturals reserves are must to fuel the engine. Oil, gas and coals are the principle natural energy providers, without which nothing can go well. However, the price of natural resources has undergone to various processes of fall and rise, but generally the price has been raised dramatically since past several decades. A price fall occurred right after US house bubble-burst-up which caused global financial crisis and followed by global economic depression. Indeed, the recession pushed over all industries condition into a grim situation which affected productions, which led to huge unemployment, particularly in developed countries. Thus, the recession brought about cycle effects—as high unemployment rate, low actual demands for manufactured goods, and finally lesser demand for energy. Such a low demand caused price fall of oil and gas. But the fall was not definitely that large and soon moved back on upward track.

But Thanks God the incentive packages held by many countries worked and many big economies started coming back on the track—but not completely, because many countries are now struggling with unprecedented unemployment rate. And the relatively convenient economic boom brought about, many view, by new emerging economies like China, India, Brazil etc. China has already surpassed Japan and has become the second largest world economy; if it goes with the same speed, it would surpass US in coming decades. The India may follow too with its current dramatic economic boom. Both countries are the world fastest growing economies which were not affected much by global economic depression.

Many view them as new engines of world economy, considering new giant markets that eat up supplied goods of industrialized countries. Presumably, these days India and China more than anything else think about economic development and growth at any cost and want to realize the fantasy-like dreams of their citizens by crowning as largest world economy——wow such an amazing name! And all other countries too struggle to increase the welfare level to that of Americans through holding giant projects which more than ever have threatened life for all type of animals on the planet. Definitely, such growing monster-like greedy for economic development is accurately based on unsustainable plans and fuelled by natural resources which are recognized the main source of global warming. But among the present enthusiasm for growth and development, there are rare to notice that planet has already lost its regenerative capacity. What we hear is promises for miracle; technological changes that will occur, and will not only stop elimination of regenerative capacity of the planet but also recover the damages.

Anyhow after a hit back in oil price after 2008, the price has stepped smoothly upward as demands are increasing tremendously. Presently, major part of manufacturing oil is exported to countries whose previous demands were ignorable. To move the engine of new emerging global economy, they are severely competing with the developed countries in spending money for natural resources provided mostly by OPEC. In addition, the prevalent circumstances show no shortfall of demand in prospective and this scenario gives OPEC confidence not to worry about another 'hit back'.

Secondly, the alternatives are not potential. After tragic incident of Fukushima of Japan, many countries have engaged reassessing their position regarding nuclear energy. Bio-fuels are also in similar standings. After floods in Pakistan and lack of cultivation and droughts in Russia, two major exporters of wheat, bio-fuels cannot be a good option as agrarian lands are allotted to cultivation of wheat and other agricultural essential goods. In addition, technologies for wind and solar energies are in initial steps and entail long-lasting time to capture the energy markets.

The above factors caused many OPEC members to maintain the current level of production which is around 30 million barrel per day and is enough to control market price fluctuation. The Vienna meeting of OPEC members failed and they were divided severely whether to lift the current level of production in order to cope with inflation. While, Saudi Arabia and Gulf members were trying to convince the rest members to lift the current at least to 1.5 million barrel per day, but Iran, Venezuela, Iraq and Algeria opposed and finally the meeting ended without any agreement.

The failure of the meeting caused many to argue that OPEC was on the brink of collapse as differences increase and opposition turns severe. Whatever the prospective of OPEC, one thing is clear that failure of the meeting favored by countries like Iran which instantly pushed for higher price, but failed to achieve because of Saudi Arabia's opposition. And it will further increase oil price which many fear to bring about a reversal to current global economic recovery. Such scenario is of-course a danger to all, not only to that of consumers but also oil manufacturers.

Jawad Rahmani is the permanent writer of Daily Outlook Afghanistan. He can be reached through mail@outlookafgh-anistan.com

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