Oil and the Arab Spring

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As popular movements toppled the leaders of Tunisia, Egypt, and Libya in 2011, these uprisings are likely to have short and long-term impact on their societies with global ramifications.

The oil and gas industry in two North African countries, Egypt and Libya, has been impacted by political upheavals, specifically an impact on production, consumption, shipping, and investment. These uprisings have fundamentally impacted the socioeconomic and political structures of society. Revenues from oil and gas exports provide the largest share of national income in some producing countries, while other countries depend heavily on remittances sent by their labors. It can be argued that the economies in the entire region are driven by oil, though in different forms and at different degrees.

Impact on Oil Supply

The global economy depends heavily on oil and gas supplies from the Middle East. This means that stability in the region is crucial to the global economic prosperity. In other words, the upheavals that have shaken Arab regimes are likely to have great impact on the management of the most important industry—oil and gas—with strong regional and international implications. The Arab world holds 49.6% of the world's proved oil reserves and 29.1% of natural gas.[1]

The impact of the Arab spring could be important for global supplies and also for the internal politics of OPEC, the oil cartel, as fewer barrels from its African members could give more room for surging production from Iraq, stated Financial Times. The International Energy Agency anticipates that oil production from Africa’s OPEC members Algeria, Angola, Libya and Nigeria will stagnate between 2012 to 2018 at 7.12 million barrels a day, posting virtually zero growth.

The IEA stated that, "Increased violence by Islamist extremists and militants, against a backdrop of political instability across much of northern and west Africa since the Arab spring, is changing the equation for acceptable risks for international oil companies."[2]

Impact on Democracy in Arab Nations

The citizens of countries with little or no oil, such as Egypt, Jordan, Lebanon, Morocco, and Tunisia, generally had more freedom than those of countries with lots of it, such as Bahrain, Iraq, Kuwait, Libya, and Saudi Arabia. When the wave of revolutions started in 2011, oil-rich regimes were more effective at fending off attempts to unseat them. The Arab Spring has seriously threatened just one oil-funded ruler - Libya's Muammar al-Qaddafi - of which many believe was a direct result of NATO's intervention which prevented the rebels' certain defeat.

Worldwide, democracy has made impressive strides over the last three decades: just 30 percent of the world's governments were democratic in 1980; about 60 percent are in 2011. Yet almost all the democratic governments that emerged during that period were in countries with little or no oil; in fact, countries that produced less than US$100 per capita of oil per year were three times as likely to democratize as countries that produced more than that. Scholars have called this the oil curse, arguing that oil wealth leads to authoritarianism, economic instability, corruption, and violent conflict.[3]

References

  1. "Preliminary assessment of Arab Spring's impact on oil and gas in Egypt, Libya" Oil & Gas Journal, 1 September 2012.
  2. "The delayed oil impact of the ‘Arab spring’" Financial Times, 28 May 2013.
  3. "Will Oil Drown the Arab Spring?" Foreign Affairs, October 2011.