Low oil prices andpromise of democracy

Long-term high oil prices have politically strengthened governments with single-handed governance systems. And those heads of governments tried to inject oil money into their societies as a success of their economic management. However, small declines in oil prices have caused external shocks in countries with weak economic structures. Today's $ 21 drop in oil prices is reminiscent of 2001, 18 years ago. There are no more markets at $ 104 as in 2011. There are differences in time and conditions that cause oil price volatility. Fifty years ago, in the 1970s, the price of 1 barrel of oil was $ 1.8. It rose up to $ 147 in 2008.

Let’s go back today… The coronavirus pandemic has weakened economic activity at the global level, reduced demand for oil and pushed down prices. In previous years, world oil production was 93-95 million barrels per day. Now, this figure has risen to 101 million barrels. Oil supply far exceeded demand. At the same time, oil consumption has decreased. World demand for oil has plummeted to 75 million barrels as 3.8 billion people remain at home without contributing to the economy. In short, the demand for oil fell by 25 percent. If the demand for oil falls by 25 percent, the question arises as to why oil prices have fallen by more than 50 percent. The main dominance of this is due to the fact that some countries still continue to buy oil, given the abundance and cheapness of oil production. They are just stockpiling. In the oil market, traders encourage cheap demand for oil by buying cheap oil. For example, non-resource countries that see such cheap oil in the market, including countries with huge economies such as China and India, buy cheap oil and create reserves.

How does OPEC want to increase oil prices?

OPEC, a major player in the oil market, sends various signals to the market with its decisions. The OPEC cartel still has a significant impact on oil price fluctuations. Differences of opinion at OPEC members' meetings do not go unnoticed on oil prices. In recent meetings, positions on the level of production between Russia and Saudi Arabia have been divided. Both countries are major oil producers in OPEC. The joint production capacity of the two countries is 1/5 of the total daily oil production in the world. Saudi Arabia has said it would increase oil production, while Russia has said it would not agree. The cost of a barrel of oil in Saudi Arabia is $ 15, and in Russia - $ 22. At the OPEC meeting, it was decided that the total number of member countries will reduce production by about 10 million barrels. Half of this has fallen to the share of Russia and Saudi Arabia. Although this decision will come into force in 10 days, the psychological factor has already played a role in the oil market and prices have risen. However, the reduction of OPEC's production will not have a significant impact on such price increases. Because it is impossible to significantly reduce oil production below this level. Therefore, the price rise in oil prices can be changed not by reducing PRODUCTION, but by increasing CONSUMPTION.

In the OPEC format, it would be wrong to look at Saudi Arabia-Russia relations as just different positions of the two countries. Most likely, the United States is behind Saudi Arabia. The United States wants to increase pressure on Russia at the hands of Saudi Arabia in the OPEC format. It wants to use the cheap oil stage to carry out a plan to overthrow Russia by minimizing its revenues within the possible limits.

Oil bow and democracy arrow: how to hit the target?

High oil prices have long kept resource-rich authoritarian rulers in the comfort zone. They enjoyed the expensive oil era. Instead of building a democracy, they poured oil money into other regions as "fertilizer" for separatism trees.

Saudi Arabia wrote its own ticket with oil magnates. The lifestyles of kings and emirs created immoral and arrogant Muslim images. Instead of finding mechanisms for a fair distribution of state oil revenues, they allowed billions to be spent on sheiks' hatable pleasures and dazzling entertainment. Instead of developing small and medium-sized businesses under the guise of Islamic banking, they increased the interest rates of large magnates. Instead of building democracy within the country, they have funded religious sectarian circles around the world.

A country like Iran, which provides about 5 percent of world oil production, has raised political Islam instead of cultivating social welfare. To keep the Mollah-Persian regime in place, it waged war against the world and spent oil money on militaristic interests. Instead of enriching itself with nuclear weapons, it has failed to lift millions of its citizens out of poverty. If the money spent on hundreds of thousands of security guards in Syria and Yemen was spent on the educational institutions of our Muslim brothers and sisters who do not have basic rights, it would be a state that is now at the forefront of integration instead of being an isolated country. Then, instead of the current closed political system, it would build an open society. It would be characterized as a system with a liberal economic orientation, not a state pursuing a policy of economic autarky.

If Russia thought of the welfare of its people within its borders as a resource-rich country instead of imitating its former Soviet Union mien, we would now see another Russia. It would have been able to build healthier political relations with its neighbors if it had been a supporter of consensus rather than a belligerent wing of the world. If a state that had made $ 100 billion from high oil production encouraged political openness, it would not be ashamed of Putinism now. If it had spent its oil wealth not on militaristic purposes but on the development of a market economy, Russia would not have a $ 400 billion foreign debt but would now be known as a donor state, a strong financial guarantor for other countries.

A country with rich oil reserves, such as Venezuela, has failed to provide social welfare. Chronic poverty and hyperinflation for the economy show how unbalanced the economic system is. It is a shame that a person like Nicolas Maduro, who is not even able to lead a single company in the world, makes decisions on behalf of the state. While the huge oil money, which should have reached the people, did not bring prosperity to the country, it caused more disasters.

Other OPEC members can be added to this list. The same can be said for other resource countries. The general context is that resource countries have caused disasters to their nations instead of building democracy and a free economy. The circle covered by the oil "curse" disturbed the public peace. Instead of having a civilized structure such as human rights, democracy, and a free market, they have moved far away from the civilized world.

What do we know, maybe the bow of the low oil era will lead to the right targets by the arrow in the name of democracy?

Maybe low oil production and cheap oil prices will lead these countries to the path of democracy?

Time will tell...

Mohammed Talibli