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I mean, this happened just a few years ago back in 2015, right? And 2008, and 2001, and 1998... These petro states suffer from the curse of natural resources

• nickfromseattle 6y ago
  >Some of the leaders do know that they can't live on oil forever, so you see some sovereign wealth funds investing in things that their people can learn and use to build their society more resiliently Do the Saudi's have the experience and culture to make this work? $90B invested in Softbank Vision Fund. [0] [0] https://www.businessinsider.com/saudi-arabia-45-billion-with-softbank-2018-10 https://www.businessinsider.com/saudi-arabia-45-billion-with...
  • supernova87a 6y ago
    Is that investment just finding a place to park money? Or does it do something good for the every day Saudi citizen? I don't follow the issue closely enough to know.
    • rhizome 6y ago
      Following the list of Softbank "successes" seems like a decent proxy.
  • andi999 6y ago
    A long time ago on an island far away... called Nauru, they tried to invest their wealth from their natural riches (phospor fertilizer). It didnt work out, if I remember correctly.
    • GordonS 6y ago
      It's a strategy that's worked well for Norway though
      • qwytw 6y ago
        However Norway was already one of the richest countries in the world before the oil boom. So there wasn't as much pressure on their government to spend that income immediately instead of investing it.
      • andi999 6y ago
        Doesnt Norway still produce oil? Naurus strategy also worked well as long as they were producing. (Although I am not worried about Norway, even if the investment were not to work out as intented, their economy seems sound)
      • ArkVark 6y ago
        Its also worth considering that Norway has a highly educated, intelligent population and an open, protestant culture. Countries without these traditions or a less educated population are more prone to corruption and mismanagement.
• awillen 6y ago
  It feels like this time is different because of the ongoing lack of demand. International flights from the US are looking to basically be nonexistent until there's a vaccine. After that, it's very plausible the business travel economy won't ever recover fully. I agree that some of the more foresighted countries are making some of the right moves (though Saudi Arabia is probably kicking itself for not moving forward with the Aramco IPO last year), but I really wonder what the effects will be on the political stability of places like Iran and Iraq - they're not in great shape to start with, and this kind of economic shock seems like about the worst possible thing to really exacerbate all the problems that exist already.
  • Alex3917 6y ago
    > International flights from the US are looking to basically be nonexistent until there's a vaccine. But there's likely going to be a vaccine in less than a year. It will take several years to know to what extent it's really safe or effective, but people who travel a lot for business can get it right away if they want.
    • WrtCdEvrydy 6y ago
      Oxford vaccine is supposed to be done by September...
    • rhizome 6y ago
      "Likely" based on what? And does an unsafe vaccine (whatever that could be) really qualify as a vaccine? What would make it something a person who travels a lot for business would want to risk?
      • Alex3917 6y ago
        Likely based on the fact that they're already in mass production, so as long as they don't seem to be immediately killing people they're going to get released even without longterm data. And someone who would travel for business if there were a vaccine at least has a reason to be an early adopter of the vaccine, whereas for someone who never leaves their house anyway it would make more sense just to wait for other people to find out whether it's safe and effective or not.
• pydry 6y ago
  It's not strictly a "wrong leaders" problem. It's much more systemic than that. Elect a good leader and the oil will provide the impetus to tear that leader down. Industry also won't form because of Dutch disease. Who wants to build a factory in Saudi Arabia even if it weren't unstable? Everything just costs too much because of the oil - land, materials, labor. Sovereign wealth funds also don't really solve the problem because 1) they attract corruption like flies on shit and 2) they're vulnerable to confiscation from foreign governments if they decide they don't like your face (e.g. Venezuelan gold in London). I suspect it could be that there is no simple solution to this. Potentially you are just fucked if you're a poor unstable country with oil and theres nothing you can really do about it. No leader will save you and no policy will help.
  • solotronics 6y ago
    They should vertically integrate while they can. Produce exportable goods and materials with the oil.
  • dodobirdlord 6y ago
    Interestingly, the first thoughts that come to mind on how to mitigate this problem fit Saudi Arabia very well (as far as I know, I am no expert). Invest in a considerable security force, try really hard to ingratiate yourself with a few powerful foreign allies that have a vested interest in your stability, and then fund education like mad, especially sending children to foreign universities, to try to raise the capability level of the country before the wheels fall off.
    • anshumaniax 6y ago
      Investing money into raising the capability level of these rich states usually has a very low success ratio mostly because their societies do not value labor but authority, power and money of which they have plenty.
    • samstave 6y ago
      This is what China's elite have been doing... Their "hundred year plan" is fn' formidible and they really will be the super-power based on, not only, their implementation of it - but the lack of forethought from literally any other nation on the planet, save Norway.
• ogre_codes 6y ago
  > I mean, this happened just a few years ago back in 2015, right? And 2008, and 2001, and 1998 The point here is that sub $40 oil is becoming the new norm. While these countries can weather a 2-3 year drop in oil prices, those short term drops are more and more frequent and the bottom keeps getting lower. Between electrification of transportation and reduced travel which may last for another 6 months (or much longer, it's not really clear), demand is down. On top of that, any time oil stays over $50/ barrel for a prolonged period of time, shale oil and oil sands production increases putting downward pressure on prices. Any way you look at it, there is no good news for oil-dependent states.
  • guepe 6y ago
    Prices have dropped more frequently because of US shale oil. Electrification is a very small factor (yet).
    • ogre_codes 6y ago
      Fair enough on all points. Electrification is the longer term existential threat. Even if 20% of vehicles are electric, the impact on demand and oil prices will be profound.
      • hinkley 6y ago
        You might sum it up as: These countries weather boom/bust cycles in oil prices, waiting for a 'someday' to refill their coffers, and every year there are more and more things trying to put off 'someday' a little longer. Essentially these countries have an antagonistic relationship with the rest of the world, as do quite a few corporations really. If you only get good news when everyone else gets bad news, then you've made an enemy of your customers. They just might know it yet. Lots of them will be working in an uncoordinated fashion to make their bad news a little better, making your good news worse and worse. Once word gets around they'll start teaming up.
        • ogre_codes 6y ago
• 3pt14159 6y ago
  In the long run the cost of energy approaches 0 and ultimately heat dissipation and space (and hence, speed) will be more relevant. But short-termism and individual greed have reigned supreme in most energy rich companies. At least Canada has a diverse economy to take up all the petro-refugees, even if we didn't build a serious wealth fund out of our oil as the Norwegians did.
  • supernova87a 6y ago
    I will make the snarky observation that if there is one good thing about the Norwegians and their petro fund, it's that they seem to have a national culture of being a bit ashamed of having come into so much money, and are willing to have it hoarded away for them for some future while they live relatively "modestly". It takes some self-discipline to not pressure your government to give handouts left and right when you're rich.
• jariel 6y ago
  " too busy feasting off of the intermittent boom cycle to prepare their people constructively for the bust that comes later." It's much worse than merely 'feasting and fasting' - the problems are very deep, another way of putting it, there was 'not much at all' in these places at all, then they had oil, and the absence of other parts of the economy isn't quite so much an artefact of dysfunction, rather, it never existed in the first place. Many of these places had 3% literacy 2 generations ago, and much of the civic institutional infrastructure (I mean like 'laws' and 'Judiciary' and 'Governance' etc.) is as new as many of those shiny buildings. Let alone the absence wide networks of useful artisanal know-how spread from generation to generation, or at least, such information that can be used to found industry. If Oil permanently crashed, it would be very bad and there would be no recovery. The Gulf States would be the poorest states in the Middle East. Saudi Arabia would be like Yemen or Algeria.
• leoh 6y ago
  Well, it's more severe now and as you pointed out yourself, it's becoming increasingly common. Not to mention a shift to renewables (despite some developing countries continuing to rely on oil), which may add increasing pressure.
• eternalban 6y ago
  Oil money comes with strings attached and to completely ignore this in your analysis seems either uninformed or disingenuous. So called Petro Dollars, for example, can't be just spent on anything. It is so difficult to dig up information on this (which was US state secret for a while btw) but iirc KSA must at least spend a portion of "their" Dollars on US treasuries. Another portion of "their" Dollars must go to US arms manufacturers. In return, US backed (formerly UK backed) Saud family gets to play King in Arabia. So that "leadership that is too busy feating off" is aka Puppets of Western imperial colonials cum American hegemon's vassals. Any efforts by locals to denude themselves of the said "leadership" is not looked upon kindly by the "interantional community". > the oil handout That's cute!
• hindsightbias 6y ago
  1985... Afghanistan, Iraq/Iran War, Balkans, Chechnya, Afghanistan again, Somalia, Iraq/Syria, Yemen. KSA’s population has doubled in 30 years and they like to burn through excess youth by exporting them. They’re going to need another, bigger war or domestically they’ll be in trouble.
• ksk 6y ago
  That is a very valid point, however, how long before the US can't get away with simply printing money during financial crises ? :)
  • bluGill 6y ago
    Longer than those of us who oppose printing money would like. The US economy has many different parts that stand well on the world stage and so it can get away with things. Agriculture in the US is something that the middle east cannot duplicate. They could duplicate some other industry, though some of it has historical roots that will be hard to overcome starting from scratch.