The world economy runs on trade and trade necessitates movement. Whether it is trade in goods or trade in services, in order for transactions to be carried out, the factors of production must move between parties to facilitate this. This global movement runs on oil and as such, oil is a very valuable commodity.
Outside of trade, the life of most individuals is punctuated by and dependent on technology. And while there have been recent innovations in renewable energy, most of this technology runs on electricity sourced from the burning of fossil fuels. The primary one being oil. This makes oil not only an engine of trade but a raw material in the production of goods, the good here being electricity. Oil can therefore be classified as one of the basic necessities of modern life.
The current COVID-19 pandemic has worsened the oil crisis that was sparked by a feud between Russia and Saudi Arabia this March. Oil has lost more than a third of its value due to the lack of global demand as a result of the lockdowns across the world.
It is reasonable to anticipate that this fall in oil prices will have an impact on the political stability of nations. In nations like Iraq and Syria that are already unstable, the fall in prices exacerbates the situation. In countries that are considered stable, falls in oil prices can create conditions and environments that may serve as breeding grounds for unresolved political tension.
A good example of this is the United Kingdom (UK), which is a nation made up of four countries. In 2014, one of these countries, Scotland, held a referendum to decide whether or not it should leave the union. Even though the referendum decision led to Scotland remaining in the union, the underlying issues that led to referendum, i.e. the undercurrent of dissent and a dislike of Westminster and Scottish nationalism remain unaddressed.
Within the UK, Scotland is the most dependent on the oil and gas sector for jobs. And already the UK’s oil and gas sector is warning that 30,000 jobs could be lost as a result of COVID-19 and the low price of oil. This current situation, if not remedied, poses a great threat to the stability of the UK. Coupled with the inability of Westminster to deliver on referendum campaign promises of greater devolution to Scotland and the fact that Scotland voted Remain on Brexit, it could give new momentum to the separatist movement within Scotland.
For countries like Iraq and Syria, the decline in oil prices has meant a reduction in revenue and therefore a reduction in funds available to combat insurgents. This is particularly dangerous in Syria, which is home to the prisons and camps holding former ISIS fighters and their families. Even though the caliphate has been destroyed, its toxic ideology is still alive and kicking. And even in the midst of COVID-19, ISIS supporters are still carrying out attacks, as evidenced by the bombing of a prison in the eastern Afghan city of Jalalabad this past Sunday.
We must not…
Read More: #BTColumn – Oil in the time of COVID-19