Following the 1986 oil crash, a famous Texan bumper sticker read: “please Lord, send us another oil boom – we promise not to waste it this time.” Now that prices have fallen by US$100, and OPEC is making sharp cuts to production, and Gulf states are running budget deficits, it seems that the five-year oil boom is officially over. Now is a good time to ask: did oil exporters around the world waste the boom? And how should they adapt to the times ahead?
The phenomenon of the “oil curse” has been much discussed – though it is debatable whether it is inevitable, and whether it always strikes in the same way. A sudden rush of oil and gas wealth often leads to macroeconomic problems – inflation soars and the currency becomes overvalued – the so-called Dutch Disease – making other industries uncompetitive. Then, when the oil boom ends, as it always does, budgets have to be slashed and exporting countries face a long and painful adjustment.
The oil exporting countries are a diverse group, even if we consider only the Middle Eastern nations, and each has faced its own challenges, conditioned by factors including its political institutions, the size of its petroleum sector relative to population, or its state of economic development.
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