Oil’s Twelve | Trade Samaritan

Oil’s Twelve

It is ironical that 10 out of 12 Oil exporting countries that relentlessly facilitate growth, progress and prosperity to the world are in turmoil and utter poverty. ‘A steady income to producers’ – this mission is far from being accomplished. Today, Oil exporting countries have unusually high poverty rates, poor health care, high rates of child mortality, and poor educational performance

It is impossible to even imagine life without Petroleum and Oil (related commodities). Increasing urbanization is continually adding to the demand and the natural resources are finite. So it is a war between infinite demand and finite supply. The yearly trading of mineral fuels, oils, and distillation products is worth $2,183,079,941 (000’).

World Oil Reserves 2012

world-oil-reserves

OPEC is an organization of 12 Oil exporting countries which was formed in 1960:

1. Algeria
2. Angola
3. Ecuador
4. Iran
5. Iraq
6. Kuwait
7. Libya
8. Nigeria
9. Qatar
10. Saudi Arabia
11. United Arab Emirates
12. Venezuela

OPEC Reserves 2012

opec-reserves-2012

The mission of OPEC is ‘to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.

It is ironical that 10 out of 12 Oil exporting countries that relentlessly facilitate growth, progress and prosperity to the world are in turmoil and utter poverty. ‘A steady income to producers’ – this mission is far from being accomplished. Today, Oil exporting countries have unusually high poverty rates, poor health care, high rates of child mortality, and poor educational performance. It is a question whether oil is a boon or a curse to the country of its origination, oil is found in mountainous and dry (desert) areas making agricultural activities impossible. Countries therefore are solely dependent on oil for their economic growth. Prices of commodities are not only volatile but the market is uncertain and oil exporting countries are vulnerable to these fluctuations.

Algeria: Algeria is a country in North Africa on the Mediterranean coast, and has varied vegetation which includes coastal, mountainous and grassy desert-like regions. Algeria is not a free country as it has an authoritarian regime. Despite a decline in total unemployment, youth and women unemployment is high. Country is subject to small but violent socio-economic demonstrations.

Present state of this oil exporting country – Long-term economic challenges include diversifying the economy away from its reliance on hydrocarbon exports, bolstering the private sector, attracting foreign investment, and providing adequate jobs for younger Algerians. Country faces the problem of housing shortage, it is also battling issues related to forced labor and sex trafficking. 23.0% of country’s population is below the poverty line and the unemployment rate stands at 10.0%. Inflation rate is 9.0%.

Angola: Angola is a country in Southern Africa. Angola is still rebuilding its country since the end of a 27-year civil war in 2002. Since 2005, the government has used billions of dollars in credit lines from China, Brazil, Portugal, Germany, Spain, and the EU to rebuild Angola’s public infrastructure. Angola has a rich subsoil heritage, from diamonds, oil, gold, copper, as well as a rich wildlife (dramatically impoverished during the civil war), forest, and fossils.  Angola faces huge social and economic problems. Epidemics of cholera, malaria, rabies and African hemorrhagic fevers like Marburg hemorrhagic fever, are common diseases in several parts of the country. Angola became a member of OPEC in late 2006 and its current assigned a production quota of 1.65 million barrels a day (barrel/day).

Present state of this oil exporting country – Though 85% of the labor force is deployed in agriculture, a whopping 41.0% of Angola’s population is below the poverty line. Inflation rate is at 10.0%, it was at 325% in 2000. Sex trafficking and forced labor is rampant in Angola.

Ecuador: Ecuador is located in South America and this country straddles the equator from which it derives its name. Ecuador depends on oil for 50% of its exports.  In 1999/2000, Ecuador’s economy suffered from a banking crisis, with GDP contracting by 5.3% and poverty increasing significantly. US dollar was adopted as a legal tender which brought stability in the country.  The Ecuadorian economy slowed to 1% growth in 2009 due to the global financial crisis and to the sharp decline in world oil prices and remittance flows. Growth picked up to a 3.3% rate in 2010 and nearly 8% in 2011, before falling to 5% in 2012.

Present state of this oil exporting country – 27.3%of Ecuador’s population is below poverty line. There are rampant instances of organized illegal narcotics operations and violence. Ecuador’s high poverty and income inequality most affect indigenous, mixed race, and rural populations.

Iran: Iran is world’s most mountainous countries and has a scenic combination of deserts and rain forests. Iran has the largest proved gas reserves in the world, with 33.6 trillion cubic meters and has a population of over 18% below poverty line. It also ranks 3rd in oil reserves however 134th in the world’s revenue ranking. Iran happens to be OPEC’s 2nd largest oil exporter and is an energy superpower. It is ironical that Newspapers today flash news only on refugees, trafficking, illicit drugs, wide spread corruption, lack of political will, soaring murder rate and chronic debt. Iran’s economy is not as strong as it should be; sanctions imposed by UN add the fuel to the fire. Citizens are finding their outlet through religion and the educated youth population is migrating.

Present state of this oil exporting country – reduction in oil revenue due to sanctions, 20% currency depreciation, double digit unemployment, inflation at 27% and a negative economic growth.

Iraq: Iraq mostly comprises of desert and mountains but with 2 major rivers; Euphrates and Tigris. Iraq which was one of the founding members of OPEC now comprises of rampant corruption, outdated infrastructure, insufficient essential services, and skilled labor shortages. Iraq has 143.1 billion barrels of proved oil reserves and ranks second in the world in terms of oil reserves. In spite of these statistics Iraq is barely able to meet 50% of its power and electricity demand.

Present state of this oil exporting country – 25% of population is below poverty line. 40% of middle class population is migrating and an unemployment rate of 16%, suicide bombing and more than 4,000 people have been killed between April and August 2013.

Kuwait: Kuwait is an island and one of the smallest countries in the world in terms of land area. Kuwait has some of the world’s richest oil fields with the Burgan field having a total capacity of approximately 102 billion barrels of proven oil reserves. Oil and petroleum account for nearly 95% of Government revenue. Kuwait enjoys a strong relationship with the United States. Kuwait supported evasion of Iraq in 2003 and provided its territory as a launching pad. Kuwait is known to have the most transparent and vocal media in Middle East.

Present state of this oil exporting country – Unemployment rate is only 2.3%, Literacy rate of 94% and Inflation rate at 2.9%. Kuwait is ranked as the 5th richest country in the world and supposedly became wealthy due to neighboring instability and its strategic location. Kuwait does encounter issues relating to forced labor and stateless people.

Libya: Libya is a country located in North Africa and has longest coastline in Africa. Libya holds the largest proven oil reserves in Africa and is an important contributor to the global supply of light, sweet crude. Libya is struggling with issues related to forced labor and prostitution. Country lacks infrastructure and is struck with poverty. Libya needs to attain political security and stability. When it comes to agriculture, Libya faces certain climatic and infertile soil related challenges. Energy sector generates about 95% of export earnings, 80% of GDP, and 99% of government income.

Present state of this oil exporting country – Libya battles an unemployment rate of 30% and 1/3rd of its population below the national poverty line.

Nigeria: Nigeria, known as “the Giant of Africa”, is the most populous country in Africa and is a member of both the Commonwealth of Nations, and the African Union. Despite its vast government revenue from the mining of petroleum. Nigeria has the second highest number of new HIV infections in the world and lacks the necessary HIV-related investments to combat the disease. Nigeria continues to experience longstanding ethnic and religious tensions. Oil-rich Nigeria has been hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management.  The Central Bank governor has taken measures to restructure and strengthen the sector to include imposing mandatory higher minimum capital requirements.

Present state of this oil exporting 24.0% Nigeria’s population is unemployed and the rate of inflation is 12.2%. The saddening part is that a whopping 70% of its population is below the national poverty line.  It is a transit point for heroin and cocaine intended for European, East Asian, and North American markets; consumer of amphetamines; safe haven for Nigerian narcotics traffickers operating worldwide; major money-laundering center; massive corruption and criminal activity

Qatar: Qatar happens to be one of the early members of OPEC. Area mostly comprises of low barren plains covered with sand. Qatar has the highest GDP per capita in the world as of 2012; according to the CIA World Fact book and approximately 14% of households are dollar millionaires. It relies heavily on foreign labor to grow its economy, to the extent that migrant workers comprise 94% of the workforce. It is a leading exporter of liquefied natural gas. Qatar’s proved reserves of natural gas exceed 25 trillion cubic meters, more than 13% of the world total and third largest in the world. In 2022, Qatar will host the World Cup

Present state of this oil exporting country – Unemployment rate of only 0.5% and inflation at 2.0%. The main reason behind Qatar’s prosperity is that it transformed itself into an independent Arab state with significant oil and natural gas revenues. And only because of its immense wealth and prosperity, Qatar does not experience the violence and unrest similar to its neighbors.

Saudi Arabia: Saudi Arabia’s geography is dominated by the Arabian Desert with virtually no rivers and lakes. Saudi Arabia officially has about 260 billion barrels (4.1×1010 m3) of oil reserves, comprising about one-fifth of the world’s proven total petroleum reserves and happens to be one of only a few fast-growing countries in the world. This country places a leading role in OPEC.

Present state of this oil exporting country – Discrimination against women (testimony of one man equals that of two women, literacy, and in family and inheritance law), unemployment rate of 11.00% on account of low literacy and technical skills rate leading to over 5MM immigrants employed, inflation at 4.00%, forced labor and prostitution and illicit drugs.

 United Arab Emirates: The UAE is a federation of seven emirates; Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain. The UAE has one of the most developed economies in Western Asia. It plays a significant role in OPEC and the UN, Commercially, the UK and Germany are the UAE’s largest export markets and bilateral relations have long been close as a large number of their nationals reside in the UAE. Since the discovery of oil in the UAE more than 30 years ago, the country has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living.

Present state of this oil exporting country – Dependence on oil, a large expatriate workforce, and growing inflation pressures are significant long-term challenges. 19.5% of UAE’s population is below the National Poverty line. Prices are steady with an inflation rate of 0.7% only. The UAE is a drug transshipment point for traffickers given its proximity to Southwest Asian drug-producing countries; the UAE’s position as a major financial center makes it vulnerable to money laundering.

 Venezuela: A triangular shaped country located in South America and includes several islands in the Caribbean Sea and Atlantic Ocean. Venezuela has a very high homicide and drug trafficking rates.  Venezuela’s economy is in a steady state of decline. Since 2012 Venezuela is grappling with issues like housing crisis, high inflation, food and goods shortage and electricity crisis. Current concerns include: a weakening of democratic institutions, political polarization, a politicized military, rampant violent crime, overdependence on the petroleum industry with its price fluctuations, and irresponsible mining operations that are endangering the rain forest and indigenous peoples.

Present state of this oil exporting country - Unemployment rate of 8.0% with 32.0% of country’s population below poverty line. Inflation rate of 22.0% makes it worse. Forced labor, narcotics related money laundering and forced prostitution situation is alarming.

As per data published by OPEC for 2012, there is a sign of improvement in Angola and Venezuela whereas Ecuador, Iran, Iraq, Kuwait, Nigeria, Qatar and UAE have worsened. Libya’s condition is fragile and drastic measures are required to institute political, social and economic stability. And Saudi Arabia GDP growth is more or less stagnant.

OPEC GDP Growth 2011-2012

OPEC GDP Growth

It is evident that countries rich in ‘Black Gold’ are not able to base their growth on this resource and need support enhanced economic growth and the creation of jobs, increased government revenues to finance poverty alleviation, the transfer of technology, the improvement of infrastructure and the encouragement of related industries. Oil dependent countries suffer from what economists call the “resource curse.” In its simplest form, this refers to the inverse association between growth and dependence on natural resource revenues, especially minerals and oil.

The causes of this resource curse are a matter of debate however It is about time that oil reliant developed countries whose progress is largely supported by OPEC take objective and more visible reforms to re-construct and re-build at least countries like Iran, Angola, Ecuador, Iraq, Libya, Nigeria and Venezuela.

 

Comments:

  • Shilpa Banerjee

    Great research, Pallavi. Oil is not unique. Other resources have produced similar problems. But being the most sought after commodity most countries are reliant on, it’s impacts are more widespread and pronounced. And it is imminent that these conflicts with grow with growing oil prices, pushing more and more developing countries into oil production, countries with existing internal strife as we have seen in Chad, East Timor, Myanmar, amongst others. Mostly poor, undemocratic and badly governed with burgeoning debt, high unemployment, and sluggish or declining economies, as you would have seen in your research, most of the worlds biggest suppliers of oil are worse off than thirty years ago when they saw fast economic growth. And escaping this oil curse won’t be easy. It sounds rather callous, but sadly no one really cares what happens to them.

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