OPEC /GCC Countries Too Are Under The Grip of The Great Depression II of 2009
Economics / Economic Depression Mar 12, 2009 - 02:42 PM GMTBy: Submissions
Dr. Raju M. Mathew wrotes: Strategy For Their Survival And Growth - In spite of their oil wealth and oil reserve funds, GCC Countries are not free from the all pervading financial crisis that turned into a global economic crisis. Starting with the automobile crisis in the USA and aggravated with financial meltdown and credit Crisis, the demand for oil declined and the price has fallen from $148 to around $ 40, shattering the high dreams of everlasting Boom into a mere Bust. How long the GCC Countries carry out their spending and affluent life style and developmental activities by using their oil reserve funds and how long could they inject their money to revive the ailing western economies besides their own economies are the two relevant questions?
Not Mere a Recession
Till Dec. 2008, everybody was telling about the present problem as a mere credit crisis or crisis of the banking sector. Thereafter, many termed it a recession. If it were a mere recession, of course it would disappear within two years. But nobody is sure about it. Most of the governments have started to accept it as a great and long standing crisis. Not only the big corporations or companies but also the general publics have accepted that it is not a mere crisis or recession, but a Major Depression! Those who are thorough with the nature or characteristics of the Great Depression of 1929 could identify the present crisis, the Great Depression II of 2009, though situations are different.
Globalization
Globalization has become a reality and effective thanks to the IT Revolution and the emergence of the Cyber Age. E-banking and e-commerce have become a reality. In spite of the political or cultural differences, almost all nations are forming part of a global economy or society in which no body could keep aloof either from its positive or negative effects. Along with the globalization of economic activities like production and marketing, fear, terror, faiths and culture too are globalized. Nobody is free from global impacts of the Great Depression II, even the remotest countries in Asia or Africa or Latin America.
Gulf Boom
For the last twenty five years, almost all GCC countries had been in boom for the ever increasing oil money. That made them to build up their infrastructure. Ultra-modern consumerist societies have been evolved with high level imports of luxury items, including luxury cars. The boom attracted most of the big business and banking companies towards the Gulf from different parts of the world. Most of the newly developed cities grow into big business cities. The price of oil had further risen to the extent of $ 148 per barrel in the first half of 2008 consequent on the growth of transport sector not only in the west, but also in India and China. As a result, most of the GCC countries become super rich and their mega oil reserve funds had grown in terms of several trillions. The GCC countries have become the major investors in the leading stock and share markets all over the world.
Coming of the Crisis
A major fall of oil price was taken place by the end of Dec. 2008 with $ 38 per barrel and then it has further fallen. The Great Depression II has weakened the very sentiment of not only of the business or trading community but also of the common public who are not ready to travel much or spend their scarce money for oil and automobiles. Most of the oil consuming industries are forced to make layoffs or cut down production. The net result is a fall of demand for oil to the extent of 60 % or above.
It is illogical to attribute the present fall of oil price is due to mere an oversupply of oil; a wrong application of a normal market phenomenon to an abnormal situation like a Great depression committed by OPEC/ GCC Countries experts . The fall of the price is the result of a decline of the purchasing power of the end users or consumers of oil not only in the USA and the other western economies, but also in India and China. The end users experience a financial or credit meltdown so that they could not spare their limited earning for spending for oil and journey and to purchase oil-based industrial products. That is why, the usual strategy of OPEC / GCC countries of cutting the production of oil would not be very effective in the long run.
For the next five years, there is no possibility of creating new demand for oil in the global market and raising the oil price above $45 per barrel, except for a very short time. Oil price will be stabilized around $40 until the general purchasing power of the end users increased further, for which long term global measures have to be implemented.. This will put all oil producing and exporting countries into a great crisis for a very long time.
GCC/ OPEC’s Options and Strategies
There is very limited option for GCC/ OPEC other than cutting the cost of oil production and avoiding all sorts of wastage. They have to carry out further research and make fresh investment to innovate and modernize the production and marketing of oil products, by using their reserve funds in order to avoid another major crisis. It is high time for them to stop heavy investments on building up their own cities, on high ways, sky scrapers because there is a limit for development based on trade or business in the coming years. It is not rewarding for them to make further investment in industrialized countries.
Almost all people of GCC/OPEC countries are under the grip of consumerism, easy way of life and extravagance without any botheration of thrifts and savings, unlike the previous generation. They have practically neglected their knowledge sector without giving any importance to advanced level learning and research and basic studies in Science, Social Sciences and Humanities. For them, higher education means some aspects of Business Management and Information Technology that have lost their relevance in the Age of the Great Depression II.
GCC/ OPEC must also resist them from the temptation of making heavy defense expenditure for the projected threats of illusionary enemies, created by the defense industry and armament traders, including terrorist organizations. The OPEC must educate its people to spend their money wisely, freeing from consumerism. The OPEC must concentrate on developing their own knowledge sectors, by improving the quality of education and research and also putting knowledge into practice.
Long Term Strategies
A sustainable development of the OPEC / GCC countries could be possible only by creating adequate demand for oil in the global market for which the purchasing power of the end users must be augmented drastically. In other words, a stability of the economies of not only of the West but also of Asia and Africa is a necessary condition for maintain a sustainable demand for oil. It must be highlighted that the greatest demand for oil in the coming decades comes from the emerging economies like, India, China and other Afro-Asian countries, as the other countries opting for green energy and cutting travel.
It would be worth for the OPEC/GCC Countries to make heavy investments for their own rural infrastructural development and also for rural and agriculture development in politically stable developing countries. Any fresh development in these countries generates a very high demand for oil and also industrial products besides innovative and value added services. It is high time for the OPEC and GCC Countries to think and plan big and to act globally rather than confining to their local or regional issues in the present age of globalization. Globalization implies increasing mutual support and cooperation at global level freeing from the narrow interests of any locality, region, culture or religion. The future stable market for oil is within Asia, Africa and Latin America rather than highly developed or saturated western economies.
• This is the third series of my work on the Great Depression II. The other works are: 1) ‘Strategy for Survival and Growth in the Age of the Great Depression II’ and ‘Saving America from Further Crisis in the Age of the Great Depression II’ .They can be found in the net if a search is made under ‘Dr. Raju M. Mathew’.
Dr. Raju M. Mathew can be contacted by e-mail: rajoocyber@yahoo.com.
Some of his other works are given in his site: www.ifkt.net
Dr. Raju M. Mathew is a strategist and theoretician with strong background in Economics, Cybernetics, Education and Information Science & Technology with long years of experience in teaching and research, including directing a major research project and supervising ten doctoral works. The Netherlands based FID nominated him as one of the twelve international members for its Committee on Research on Theoretical Basis of Information Science in 1983.
Dr. Mathew formulated two basic theories of knowledge consumption and knowledge production that got published jointly by the FID and the USSR Academy of Sciences in 1985 in the work, ‘Theoretical Problems of Informatics’. Now these theories are known in his name and have become the field for doctoral research.
In 2005, Prof. Mathew proposed Knowmatics and Knowledge Technology as the two Post-Information Technology disciplines for processing and handling knowledge so as to develop knowledge industries. He also set up the International Forum for Knowmatics & Knowledge Technology (IFKT). Some of his works are available in the site: www.ifkt.net
Dr. Mathew is on a mission of making the world aware of the impacts and intensities of the present crisis, the Great Depression II of 2009 and persuading the governments and international agencies to formulate correct strategies and policies and implement them urgently to deal with it and make an early recovery from it, so as to save the lives of millions, especially the young.
© 2009 Copyright Dr. Raju M. Mathew - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
