Transition from Oil

OPEC just can't catch a break.

First it was climate change and its stimulating effect on renewable energy sources that competed with fossil fuels for market share.  Then it was the Russia-Saudi oil price war (remember that? only four months ago?  It even has its own Wikipedia page).  Insanely complex, but oil prices went down.  Now - well, we fill the tank on my car about once a month, and Abbey's car hasn't gone anywhere since the pandemic started.  Gasoline use has gone off a cliff.

I used to read a lot about "peak oil," the point where all the easily-accessible oil has been pumped out of the ground, and worldwide production levels off, and then starts to decline.  We don't hear about this much any more, perhaps because fracking's short-term stimulative impact has taken our mind off of decreasing oil production and rising prices.  

But the oil producing states are feeling the pinch.  They're not benefiting from the fracking boom, and we're certainly not the only ones with solar panels on our roofs and cars that get 50 mpg.  In fact, they are nothing if not realists:

Four years ago Muhammad bin Salman, the de facto ruler of Saudi Arabia, produced a plan called "Vision 2030" that aimed to wean his economy off oil.  Many of his neighbours have their own versions.  But "2030 has become 2020," says a consultant to Prince Muhammad.

Wean Saudi Arabia off oil?  2030 has become 2020?  There are changes coming - have been coming - to the whole fabric of the Middle East - political, financial, social, cultural - that the pandemic has exacerbated.  Changes that, apparently, are already here.

As oil prices continue to be low and go lower, most major Middle Eastern and other oil producing nations are living on savings and cannot meet expenses.  The economies of many other nations are dependent on the remittances sent home from their citizens who emigrated to the oil fields and the big cities of Saudi Arabia and Kuwait to find good-paying jobs - in some cases, these remittances represent 10% of GDP.  Did you know that Kuwait, Saudi Arabia and the UAE account for one third of global tourism spending?  And so on.

The new world will experience much more instability in one of its most unstable regions, unless the countries involved can figure out how to transition to a non-oil future - fast.  Either way, the economic shock waves will travel around the new world for quite some time.