The issue of oil prices, after having reached record and unimaginable levels, has dominated international economics and politics recently. As we all know, one field has a direct effect upon the other in many instances.
According to numerous figures, the price of oil has reached a record of over US $130 per barrel and will continue to rise, according to experts, to reach US $200, causing many to lose sleep.
UN Secretary General Ban Ki-Moon visited Saudi Arabia, the largest oil producing country, to talk about how it could help to contain the turmoil of oil prices. He announced that the kingdom of Saudi Arabia had decided to increase oil production in July by approximately 200,000 barrels per day in response to consumer demand.
Saudi Arabia announced that it would host a meeting to be attended by major oil producers and consumers on 22 June, 2008 in Jeddah to discuss the rapidly increasing price of oil.
Oil prices have increased five fold since 2003 for numerous reasons, most prominently due to political tension in the Middle East. Moreover the demand for oil is on the rise in growing states such as China and India, according to AFP.
This increase does not necessarily mean the transfer of trillions of dollars worth of oil from consumer to producer countries. It means great transformations in many fields, sectors and services, the simplest and most complex of which, simultaneously, are the significant alterations in the pattern of commercial globalization and the transporting of goods in particular.
A report by a group of specialists that was published in Newsweek stated that if oil prices continue to rise and government subsidies are no longer available, which is a possibility, a revolution of a new kind will emerge, namely, the revolution of energy. This means that there will be many changes to consumer trends and a new way of thinking with regards to renewable energy and reducing the dependence upon oil or the “oil addiction” in the words of the New York Times writer Thomas Friedman, who is keen to end this addiction to Middle Eastern oil and autocratic states, as he describes them.
Some environmental activists welcome this increase in oil prices because it will push oil “addicts” to change their ways by searching for environmentally friendly sources or at least force them to reduce consumption by adhering to speed limits for example or by installing insulation systems in homes to reduce the energy needed to heat houses.
However, with the rise in oil that is expected to reach US $200 per barrel unless something drastic happens to prevent this, matters have become more difficult than environmentalists initially believed since these price hikes affect the structure and essence of consumer life all over the world. Suffice it to say that recession would afflict the international aviation sector due to the increasing price of aviation fuel. This is also the case for motor vehicle companies that produce SUVs.
The Newsweek report indicated that American Airlines announced that it would reduce its number of flights and no longer use old aircrafts that consume larger quantities of fuel.
Air France-KLM warned that profits were likely to decrease by a third this year. Air France-KLM CEO Jean Cyril Spinetta hinted that if oil reached US $200 per barrel it would represent a far bigger shock to the world than 9/11!
Furthermore, the inability of some governments in developing and semi-developing countries to cover the cost of the rising price of oil amongst their people will lead to political unrest, revolutions and the eruption of more political tension and dispute. The irony is that the increase of the price of oil leads to conflict between internal powers in some country or other over oil resources and conflict in turn will lead to an increase in oil prices in what will be a vicious circle, according to one expert.
Here we must remember that one third of the world’s civil wars and conflicts take place in oil producing countries, according to the Newsweek report, which states that “there will be blood” for the sake of oil. This is the title of an Academy Award winning film that stars Daniel Day Lewis who won an Oscar for his role in the film as a ruthless oilman in the American south.
The movie looks at the early stages of oil prospecting in America and the conflict over capital and natural resources. The film is first set in 1898 and demonstrates how conflicts broke out, blood was spilt and political slogans were created as a result of sacred oil.
One of the most important changes that will happen with respect to political vision ─ the role of which will transform because of the accumulation of oil profits for oil giants and consumers in the new major economies of China, India, Russia and the Gulf states for example ─ is that it may replace traditional thoughts and values concerning society, women’s rights etc. with Western thoughts and values. This would form a new society based on new values as a result of its status as a major international economic power. This is merely a hypothetical presumption.
Oil, the backbone of industries and the source that provides the world with luxuries from television sets to shavers, is also the reason that blood has been and will be spilt. We are witnesses to the oil-related conflicts of Abyei in Sudan or Arbil in Iraq and other implicit and explicit crises over oil resources.
The nature of oil is that one day it will be exhausted and oil producing countries, particularly Arab countries, do not think about this. They must build societies based on human potentials, knowledge and experience, which will never run dry unlike oil otherwise these societies are doomed.
Many oil producers have a distorted and mixed opinion of oil; some believe that these countries that have suffered severely from poverty have been blessed with oil to recover from their desperate economic situations. Others have a skeptical view of oil because it seduces the world’s superpowers and has turned countries into arenas to be occupied by other countries since they have not developed gradually to open up to the world.
The truth is that oil in itself is neither a curse nor a blessing; it is a blessing or a curse depending on the way that it is used and whether its profits are used to build free, intelligent, well-educated, and bold societies ─ in other words, whether it guarantees a future for societies. However, if oil returns are spent irrationally or ineffectively, the written history of oil money will be brief that is if anyone cares to write about our history in oil-producing countries.
At the end of day, there are benefits and drawbacks to the increasing price of oil for the producer and consumer respectively. But this is not always the case; the accumulation of money in foreign accounts or the failure to invest oil revenues in establishing vital and permanent projects to build new societies validates the idea that oil is a curse because oil revenues in these cases simply sustains underdevelopment and adds to “modern backwardness” i.e. material advantages and luxuries. However, oil money would be a blessing – and what a blessing it could be – if it were to contribute to real development and strengthen the values of science, intellect and open mindedness which form the foundation of solid societies and rational states.
Fifty, one hundred or even one hundred and fifty years is a short timeframe for the progression of nations and societies and these are predictions given by some of when oil will be depleted. But a year, or even a month or a day in the age of nations and societies might be equivalent to a thousand years because of the transformations that have taken place within it and the orientations and decisions that have been taken that have an eternal impact.
The real test lies in whether oil producers will heed the warnings of time and whether they will turn their oil into a blessing or a curse.