oil rig

Global Post-Oil Situation

I t’s not so difficult to see the current situation in global markets and economies. After Oil price decrease driven by oversupply, oil producing countries such as Russia, Azerbaijan, Kazakhstan, Saudi Arabia, etc. are having still economic stress period. One of the main reasons for this stress is the already decided budget planning that happened before the oil-price depression.

Oil revenues, as most of the commodity revenues, are cyclical. Hence, the sudden price drops are not unusual. It could be predicted in the past that the prices will turn upwards again, however today it would be a mistaken forecast. Recent decrease in the prices is a signal of a significant change in global oil strategy; which would have an impact on most countries’ geopolitical situation.

During 1990s the oil was very scarce and its price was going up. As it was easily consumed, extracting and producing new sources were becoming marginally more expensive. At the end, oil producing countries were earning too much easy-money. Nonetheless, it couldn’t last long. The high prices, technology advancement, and human capabilities have created alternatives to the limited oil commodity. As a result, Oil Industry was shaken within the industry itself (Shale Oil Revolution) and from out of the industry (Renewable Energy Sources).

Solar and Wind Power Sources have become as cheap as $0.03 per Kilowatt/hour. Consumer trend towards the eco-friendliness have made the green products even more competitive. Tesla cars are salient examples of it. With the fully electric cars at reasonable prices, Tesla cars have made the headlines in the news by being `the most successful product launch in history`.

As substitutes increase, oil prices will have to be competitive in order to survive in the market. New technologies will add to the low-cost production which will again decrease the prices.

Till recent years, oil producing countries were having very strong geopolitical advantages. Oil being a divine gift to the country, the governments were spending it as if it would never run out. Spending billions in infrastructure to create an internally-empty beauties, hosting non-beneficial games, and so on had been the main goal of the governments.

From this and other experiences, countries should understand and consider how technology can make commodities, capital, etc. ineffective in a very short period. Hereafter, countries should be wise and strengthen it’s knowledge capabilities and crate an efficient environment to convert this capability into growth. Improving education, supporting knowledge and technology intensive industries, gaining from FDI by reforming its policies are few of the broad alternatives.