High Oil Prices: Reform Plans Buried Under Oil Cash

Oil Prices are rising and may stay high for some while. Not for the first time, producing countries have to decide how to spend their windfalls. The money could go into productive investment and economic reform to give growing, dissatisfied, younger populations a stake in the future. Or ruling groups could pocket the wealth as they have so often before, putting off the reforms that had seemed inevitable in the era of low prices.

The World Today Updated 19 October 2020 Published 1 November 2004 4 minute READ

At a superficial level, the oil revenue windfall may seem to signal good news for the region. Surprisingly few countries are not oil or gas producers. In fact only Morocco and Lebanon produce no hydrocarbons and most states are highly dependent on such exports. Even countries not normally thought of as oil exporters find themselves dependent on it for government revenue and foreign exchange.

For example, Yemen is more than ninety percent dependent on oil for merchandise exports. For Syria the figure is over seventy percent and even Egypt’s export dependence is more than forty percent. Higher oil and gas prices – which are linked to oil, plus rising production, imply greater government revenues and access to foreign exchange.

And prices have been firming. The Organization of Petroleum Exporting Countries (OPEC) basket of crude oils averaged $24.79 per barrel in 2002; $28.22 last year and; so far this year $35. By mid October the basket price was close to $50.

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