It’s been over a year that oil prices have been declining and are at the lowest point they have been in twelve years. This has brought many complications especially to economies that depended on this commodity and particularly on dictatorship states that took advantage of large revenues of capital when the price was at $110 per barrel to perpetuate themselves in power while financing its corruption and populist practices acting as Robin Hoods of the poor. Which in reality the only thing they have accomplished is to increase the government officials bank accounts and have brought their economies to the brink of collapse now that the price is as low as it is and their fictitious economies can no longer sustain themselves.
Such is the case of Venezuela which after attempting of being South America’s revolutionary state and influencing most of the countries in the hemisphere with cheap, free oil, and dirty money, the inevitable has arrived and the Bolivarian Revolution is collapsing. No more free oil or dividends, no more allies to hold the revolution and it is just a matter of time for Venezuela to change governmental officials, and hopefully return to a legal democracy.
The trend in recent elections around South America is the departure from the Venezuelan model and its corrupt practices and more towards free electoral practices with efficient fiscal management. Such is the case of Argentina which has made severe corrections to its model in a recent change of government. Peru is having elections in April and so far everything indicates that a responsible government will take office, Guatemala has changed directions recently as well for the better. Cuba just restarted relations with the US in an effort to avoid calamity with its economy in shambles and no more assistance from Venezuela or the hay day of the Soviet assistance in the last century and Ecuador seems to be following in the same direction where more democracy is demanded and better fiscal practices, away from populist impulses, exploiting in many cases an electorate that lacks education and adequate judgement when electing officials.
In other parts of the world, Russia is cutting down benefits for its citizens and people are getting unrest and are questioning the corruption installed in power for a long period of time-Russia is 50% oil dependent for their income and are taking a blow with current prices and more bad news to follow for this country.
ISIS is taking a hit as well from above in the form of bombs and with low crude prices, recently they don’t have enough cash to finance the terror crescendo that was happening just a few months ago and all the bravado that they were displaying. Sure, they still are a threat but they are losing steam.
Most recently the situation looks dire for many oil producing countries, there is just too much production and less consumption around the globe especially by China. In addition to the regular producers, Iraq has reported growth in their production in the last year and Iran which is the 4rth largest producer will soon be contributing with more production now that sanctions have been lifted. In the U.S. some of the surge in the increase in production from fracking in the last few years have taken a hit and some companies are starting to go bust. Another downside to the low price is the loss of jobs related to the oil industry but that is compensated with growth in the economy thanks to more disposable income to the middle class. Overall this is good for everyone and most people are stoked about this trend and spending more.
Of course the oil industry, coal producers and the stock market are in complete shock and say that this is all bad. It is all bad for them because they use to live extremely good from the rest of us making the big bucks but those days are over. There is a shift in the U.S. and world economics and the scale is moving more towards in benefiting the majority and not just a few which has created the huge income inequality issue. In addition, those countries, states and cities that are leaning towards clean energy will be the last ones laughing and today there are great examples of this already happening. The least dependency of fossil fuels is the only way forward to save the environment and to create a more balanced world economy.
The world is slowly uniting to save our planet and restore economic balance