Will the drop in oil prices lead to greater global unrest?

2015-08-25T12:58:28-04:00

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.

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From Venezuela to Iraq to Russia, Oil Price Drops Raise Fears of Unrest

The downward spiral of oil prices and the reluctance to reduce production are threatening to destabilize economies and governments in many places that are already fragile.

Response by LCDR Private RallyPoint Member made Aug 25 at 2015 1:02 PM

2015-08-25T13:02:46-04:00

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.

Response by LTC Stephen F. made Aug 25 at 2015 1:30 PM

2015-08-25T13:30:20-04:00

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 Private RallyPoint Member, SGT Forrest Stewart, SGT Randal Groover, SPC Private RallyPoint Member

Response by PO1 Mike Edgecomb made Aug 25 at 2015 1:30 PM

2015-08-25T13:30:59-04:00

I just read where an East Coast refinery just shut down a gasoline production facility because of unspecified problems, and that will lead to increased prices due to the interruption in production. I wonder how many other refineries will have unspecified problems?

Response by 1SG Private RallyPoint Member made Aug 25 at 2015 1:45 PM

2015-08-25T13:45:50-04:00

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.

Response by LTC Bink Romanick made Aug 25 at 2015 1:59 PM

2015-08-25T13:59:57-04:00

It will durther dEstabiliZe the Russian economy and reflect negatively on other oil prorducers.. Making the Russian internal situation less stable. The world economy will be effected.

Response by PFC Al Sethre made Aug 25 at 2015 2:05 PM

2015-08-25T14:05:55-04:00

At the beginning of the year, OPEC did not cut production because they wanted to hurt Russia, as well as see how US shale oil production would be impacted by lower prices. The Middle East producers have enough money to take a short term hit in order to play games with the rest of the world.

Response by MSgt Manuel Diaz made Aug 25 at 2015 2:22 PM

2015-08-25T14:22:56-04:00

Wars n more wars and a shrinking American might. Recon that will be under united nations control if Obama has his way, and watch him move to control the first socialist world order since he has broken the US Constitution and this republic.

Response by Cpl Dennis F. made Aug 25 at 2015 4:33 PM

2015-08-25T16:33:25-04:00

I seem to recall a line, either from the movie "Syriana" or "The Kingdom" (Both great BTW) to the effect that the Arabs "started as goat f**king nomads, have squandered their resources with poor decisions, deals, and bad management and will soon return to their past nomadic existence" The implication being that they have not used their oil wealth as a means to diversify and make their countries better for ALL of their people. I believe the House of Saud is way over due to fall. Will it effect the average indigenous population, probably not much, not very far to fall.

Response by SSgt Alex Robinson made Aug 25 at 2015 7:29 PM

2015-08-25T19:29:32-04:00

It may... Especially form Russia since their economy is tied to oil

Response by SPC George Rudenko made Aug 26 at 2015 5:32 PM

2015-08-26T17:32:44-04:00

No, big oil still making billions

Response by SGT William Howell made Aug 27 at 2015 7:48 AM

2015-08-27T07:48:45-04:00

Some of you have really drank the Kool Aid. There is nothing good about paying more for something. Economies are self correcting . The Middle East will sink or swim. Kuwait is a perfect example. They have diversified the oil money into other forms of income. They are the largest exporter of SAND in the world. Can't make concrete without it.

China will just adjust it's spending and expansion on global markets. Russia is in a downward spiral because if the corruption that Putin has in there and there is no fixing that with any kind of economic solution.

Oil companies have over inflated gas prices for decades and they are still going to make money from our dependency, just not as much.

Response by MSG Brad Sand made Aug 27 at 2015 11:52 AM

2015-08-27T11:52:56-04:00

It is kind of funny...high oil prices 'caused' the OIF now low prices are being used for additional fear mongering. Big media needs to fill 24 hours of 'news' 7 days a week.
Russia and ISIS having less funds seems pretty bad to me?

Response by PO3 Steven Sherrill made Oct 16 at 2015 12:46 PM

2015-10-16T12:46:35-04:00

GySgt Wayne A. Ekblad Oil is misery. If the price of oil is up, then it strengthens investors. It also raises the price of Gasoline and other petroleum based products having a negative impact on the general populace. Conversely, when the price of oil is low, it hurts investors, but has a positive impact on the general populace by lowering the price of petroleum based products. Oil producing countries are impacted either way. When the investors are happy they put more money into the system, strengthening the economy. At the same time consumers begin looking for alternatives, traveling less, and in general reducing consumption that harms the economy. There is no way to make everyone happy. I would say that oil itself will lead to unrest simply because it is such a volatile commodity. Just my simple opinion.

Response by PO3 Private RallyPoint Member made Oct 16 at 2015 12:50 PM

2015-10-16T12:50:21-04:00

Yes, for the past two decades. There are super power that build on a good oil price. When that price fall... those super power will start doing stupid stuff...

Response by 1LT Aaron Barr made Oct 16 at 2015 1:06 PM

2015-10-16T13:06:13-04:00

Already has; Venezuela, Russia and Iran are already suffering from it. Half of me wonders if Russia's recent involvement in Syria might have something to do with trying to pressure the Saudis as they're the main reason the prices are low.

Response by GySgt Wayne A. Ekblad made Oct 30 at 2015 5:56 AM

2015-10-30T05:56:21-04:00

World oil reserves ...