Tag Archives: OPEC

Another Refine Mess: China’s Proposed Futures Contact ‘May Demolish World Order’!

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Graft World Cup Latest: Iran FTW!

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Laughing Last and Longest? Kazakhstan’s Caspian Energy Dreams ‘Promise Unfathomable Riches’

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Resource Curse: Is Africa the New Middle East?

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Operation Iraqi Freedom: Goodnight Vienna!

It seems incredible that almost a decade separates the date of this blog post and the beginning of the Iraq War, almost indisputably the most controversial military operation in the first decade or so of the twentieth century; bewilderingly and despite its recency, there is still much about it that is uncertain. There are profound disagreements over the precise reasons that the United States – ultimately joined, though mostly symbolically, from forces spanning nearly forty countries – pursued this conflict, and it remains to be seen whether the incredible fiscal drain placed on America’s resources, conservatively estimated at US$3trn by Nobel Laureate economist Joseph Stiglitz, will prove to be a burden of decisive proportions.

But one thing is becoming ever-clearer: the geopolitical effect of military engagement in Iraq has been to turn one of the largest oil producers in the world into a state with a symbiotic relationship with Iran. In fact, so strong is the bond between Iraq and Iran – neighbours locked in a one million casualty conflict of their own for much of the 1980s – that the two countries are now forming an alliance with OPEC to counter Saudi Arabian influence within that organisation. This is particularly significant because despite Saudi Arabia’s dire international image, it is perceived as a reliable partner when it comes to pumping sweet, black crude out of the ground and supplying it to world markets with few questions asked; Iran, much like Venezuela, is keener to utilise the political potential of OPEC towards its own geostrategic goals.

Naturally, this feeds back into the United States’ present economic predicament, which is characterised by sensational levels of wealth destruction and, in the form of astonishing quantities of monetary printing, desperation; the last thing that the energy-intensive American economy needs is for the price of its key production and transportation input to undergo a structural increase in price because of a shift within the dynamics of OPEC. Yet that is precisely what it is being confronted with, the irony being that the status quo of the early 2000s would have precluded such an outcome.

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Women’s Suffrage in Saudi: Genuine Reform or Showtime Arabia?

As our regular readers will be well aware, we at Mediolana have been providing our burgeoning following with analysis galore on the Arab Spring, and in this context have swiftly realised that when it comes to the future of the Middle East and North Africa, almost nothing seems to be off the cards; however, the developments of Sunday, 25th September 2011 had even Mediolana’s blogger-in-chief spluttering into his cappuccino in disbelief: King Abdullah bin Abdul-Aziz Al Saud announced that his polity was to extend the vote to its female subjects.

The main thrust of this reform is that women will be allowed to vote and stand as candidates in municipal elections from 2015. Women are also to be appointed to the Majlis Al-Shura or Shura Council, a consultative body that advises the monarchy on areas of public policy.

Is this a revolutionary change? On one level, hardly: of Saudi Arabia’s 285 municipalities, half the seats are filled by government appointees; meanwhile, in the Shura Council, the emphasis is on a perfunctory interpretation of the word ‘consultative’: discussions on the fate of the kingdom’s oil revenues are strictly off-topic. Almost whichever way one looks at it, Saudi Arabia has a democratic deficit which is so profound that what should be an event of real structural significance begins to lose meaning when placed in a wider context, at least in a purely mechanistic reading.

However, on another level the conferring of suffrage on Saudi women can be viewed as an extraordinary occurrence for the following reasons:

1. The Triumph of Politics Over Economics. In an era of Fonduenomics and Peak Oil, where petroleum prices are shifting to an ever-higher base and competition over vital resources has arguably never been greater, Saudi Arabia should be in an incredibly strong position. As arguably the key mover in OPEC, an organisation whose revenues are projected to top US$1trn in 2011, Saudi Arabia is in theory about as insulated from recessionary storms as any country can be; within the specific context of politics, it can attempt to obviate dissent via financial incentives in a way that few other states on earth can dream of. Yet even this has not stopped the momentum of the Arab Spring reaching Saudi shores, a phenomenon which merits closer examination.

2. The Importance of Image. Saudi Arabia’s international image was a fairly anonymous one up until the 1990s, consisting mainly of staid narratives on themes such as petroleum, profligacy and pilgrimage; a more than decent showing at the 1994 FIFA World Cup in the United States raised hopes that the country may yet make an impression on the football world and, in turn, broader popular culture. However, in the last decade or so Saudi Arabia has become synonymous with a whole host of negative trends, from the spawning of extremist ideologues to alarming deficiencies in the realm of urban planning. Interestingly, the perception of Saudi Arabia within the Islamic world seems to be plummeting: moves such as an Indonesian moratorium on labour exports to the kingdom in protest at the execution of Ruyati binti Satubi, a 54-year-old domestic worker, would have been unthinkable even a few years ago. The fact that the highest echelons of the Saudi state are tacitly recognising this state of affairs in making constitutional changes is notable.

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Libya and OPEC: the beginning of the end of cheap oil?

The ultimate consequences of the still-unfolding events in Libya remain to be seen, but while the world’s eyes are focused on the spectacle of a courageous revolution against a dictator whose probable final days at the helm of his country have been characterised by a mixture of industrial bloodletting and surreal performance art, two developments which have barely flickered on the global consciousness could yet prove to be the most profound results of the Libyan uprising:

1. On 22nd February 2011, the price of Brent crude oil rose to US$108 per barrel; six days later, Al Jazeera’s Hoda Abdel-Hamid reported that the opposition authorities now in control of eastern Libya ‘are scrutinising contracts with the intent to cancel any that they deem to be illegal‘;

2. On 25th February 2011, the Spanish government announced that effective from 7th March 2011, motorway speed limits would be lowered, train ticket prices cut and usage of biofuels would be intensified. Around 13% of oil consumed in Spain is sourced from Libya; deputy prime minster Alfredo Perez Rubalcaba stated that a €10 per barrel increase in oil prices would cost Spain – a country already on something of an economic precipice – an extra €500m per month. Spain was alone in instituting such measures.

These developments are significant because they illustrate two interrelated phenomena: the strong possibility of a recalibrated relationship between oil-producing nations and their clients, and the rather moderate response of oil-dependent territories to this recalibration. As this blog examined on 7th February 2011, uber-economist Nouriel Roubini has convincingly posited that there is nothing less than a symbiosis between recessions and high oil prices. And this makes recent developments in Libya even more salient, because while its revolutionary predecessors Egypt and Tunisia possess relatively small oil reserves, Libya is a member of the Organisation of the Petroleum Exporting Countries (‘OPEC’), pumping 1.6 million barrels per day and meeting almost 2% of the entire global demand for oil.

OPEC itself is replete by countries in the Middle East and North Africa that are presently experiencing or have rich potential to experience significant unrest; indeed, Algeria, Iran, Iraq, Libya and Saudi Arabia make up nearly half of the organisation’s membership. If the thirst for reform in these countries proves as unquenchable as the planet’s desire for palatably priced oil, a lot more contracts might be abrogated, and many more speed limits – not least that of the world economy – reduced.

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