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Oil and Poverty
Oil has been a massive drive for inequality in the modern world, especially The Organization of the Petroleum Countries (OPEC) member states. Oil and poverty intertwine, especially in OPEC nations. OPEC, at its core, is a union of oil-producing countries that work together to make decisions on how much oil countries extract and export around the world. While OPEC strength has diminished in the world with increased oil supply coming in from Canada and The United States, OPEC nations still have stranglehold grips on their economies and governments. OPEC found its beginning in the 1960s with five countries, including Kuwait, Venezuela, the Islamic Republic of Iran, Saudi Arabia and Iraq.

Reliance on Oil Revenue

One thing that all the founding OPEC nation members have in common is a poor Freedom House Index score. Kuwait currently has the highest score with Freedom House giving it an overall score of partly free while the other four have a score determining them not free. With five distinct countries with different styles of government and cultures with one being across the globe, the one common thread is the large oil reserves that each of these countries relies on. For instance, a report by export.gov finds that “oil comprises nearly half of Kuwait’s GDP, around 95 percent of exports and approximately 90 percent of government revenue.”

The fact that government revenue comes mostly from Kuwait’s nationalized oil industry and the Kuwait Petroleum Company (KPC) shows an alarming trend. With the country relying mainly on oil revenue, the government taxes the population less, meaning that the government can ignore the requests for policy reform for less risk. If everyone in the United States decided to protest government activity, the federal government would have a serious fiscal issue on its hands, but if Kuwait’s population decided to stop paying taxes, the overall fiscal attitude of Kuwait would only change minimally.

Kuwait’s failure to support its people reflects in the numbers. According to the Central Intelligence Agency (CIA) Factbook, the total unemployment rate in Kuwait is 15.4 percent, with women being 30 percent unemployed and men being 9.4 percent unemployed. The CIA also cites that current health expenditures are only 4 percent of the economy, and there are only two beds per 1,000 people. These three simple metrics show a blatant disregard towards social issues such as women’s rights and political/economic issues such as health care and infrastructure.

Solutions

In some ways, the problem of oil and poverty and OPEC is self-repairing. As large and easy oil reserves start to dry out, the cost of obtaining more oil will increase to the point where it is no longer economically feasible to extract it. There is much debate as to when this will occur, but for many western countries, green energy has already become cheaper than traditional fossil fuels. This trend reflects in its GDP growth rate, which the CIA has concluded to be negative 3.3 percent and has been negative since 2015. With 90 percent of the countries’ GDP tied up in oil and the growth rate being negative, one can infer that as the world’s oil supplies dry up and people’s preferences shift towards green energy, Kuwait will eventually have to find another way to support itself.

Fighting the fight against OPEC and oil and poverty is easier than one might think. Since OPEC operates as a union based on exports, supporting NGOs and governmental policies towards green energy in any capacity either directly on indirectly damages OPEC. A great NGO to support is Green America which has the mission statement, “Our mission is to harness economic power—the strength of consumers, investors, businesses, and the marketplace—to create a socially just and environmentally sustainable society.” With Green America’s goals of social equity and sustainability, it is the perfect NGO to counter oppressive regimes that profit from killing the planet.

Spencer Julian
Photo: Wikipedia

 

Fuel Shortage in Venezuela
In 1960, the Organization of Petroleum Exporting Countries (OPEC) established to coordinate and unify policies around the price of oil. This intergovernmental organization consists of 15 nations that produce 44 percent of the world’s oil and own 81.5 percent of the world’s oil reserves. Given the importance of oil in today’s economy, it is reasonable to assume that OPEC members are well-off, especially those with vast oil reserves. However, the fuel shortage in Venezuela proves otherwise.

Fuel Shortages Starve the Country

Venezuela, one of the five OPEC founders, boasts the world’s largest oil reserve. Although this South American country sits on a vast reservoir of mineable liquid gold, there is a fuel shortage in Venezuela that starves it. Due to years of mismanagement and corruption, the oil-rich nation has dried up its gasoline pumps, leaving lines trailing from gas stations that last hours. People can sometimes wait for days to fill their tanks. In the southern and western states of Tachira and Bolivar and the central states of Carabobo and Aragua, people can wait in line for five hours or more. Venezuela has limited power so it rations it; periodic power outages means that people cannot pump gas. However, there are no gas shortages in the country’s capital, Caracas; oil tankers divert into the capital to supply its six million citizens, but also to prevent political unrest around the Parliament.

These fuel shortages and gas station lines are impeding on already troubled Venezuelan lives. The hyperinflation and lack of job opportunities in the country hinder a good quality of life and gas shortages push this even further. Citizens cannot get to their jobs when their cars are empty on fuel or when they are stuck in line to fill up.

However, the fuel shortages in Venezuela are troubling to not only the day-to-day lives of citizens but also the entire agriculture industry that feeds the population. Fuel shortages compound the effect of food insecurity. When there is a shortage of fuel, food cannot make it from farm to market or from city to city. There is no rail system to move food either. Farmers leave harvested produce to rot, simply because the truck that transported vegetables to the market never arrived. On May 20, 2019, the National Federation of Cattle Ranchers in Venezuela issued a public plea to the government citing its difficulty moving cattle across the country.

Delayed shipping dates are not the only way fuel shortage in Venezuela impacts agriculture. Farmers might have nothing to sell because pesticide shipments might not arrive to prevent insects ruining their harvest. Without the shipment of crucial parts, farmers cannot operate basic equipment and without a reliable gas pump, workers cannot take the bus into work. Fuel shortage in Venezuela impacts not only the food but the equipment and the workers necessary to cultivate crops.

Plummeting Oil Production in the World’s Largest Oil Reserve

In the past, Venezuela has provided generous gas subsidies to make fuel almost free. However, the issue of fuel shortage began in 1989, when then-President Perez announced an end to the gas subsidy. The announcement resulted in large riots and since then, the suggestion of increased prices of oil is taboo. Thirty years later and after six years of economic crisis and recession, oil is still cheap, but production has dropped significantly. At the beginning of 2019, PDVSA, the state-owned oil and gas company, produced 1.2 million barrels of oil. On April 2019, this figure dropped down to 830,000. This decrease in production is due to obsolete machinery and under-resourced facilities. Additionally, as of now, only two refineries are in operation.

In addition to the mismanagement and corruption that has caused these plummeting oil production rates and shortages, the Maduro government also blames the corruption of former management of resources and U.S. sanctions. These sanctions prevented the export of specific materials that refine crude oils into usable fuel.

Solutions

Corruption, mismanagement and sanction stand-offs are difficult to address. However, there are many NGOs that operate on a community level and provide for those immediately in need. The Venezuelan Engagement Foundation Group (VEFG) is one of these NGOs with programs that address the effects of the fuel shortage and resulting food insecurity. One of its top missions is to provide nutritional meals to children in need through food programs. This year, its food programs have targeted communities in need, mainly children who are the most impacted demographic regarding food shortages. VEFG’s #FeedAKid campaign guarantees that $1 can give a child one meal a day through community kitchens and school canteens. Currently, VEFG feeds 3,000 children, teenagers and elders in 32 different centers worldwide or 90,000 meals a month.

Venezuela’s position is full of contradictions. As an oil-rich OPEC country with fuel shortages and once the richest country in South America, it is now grappling with hyperinflation, failing job markets and food insecurity. The corruption and mismanagement in government have failed to convert the potential of oil into social welfare. Venezuela has limitless potential in terms of its crude oil reserves ready for refinement. The efforts of NGOs on the local level and change on the national level will refine the crudity of poverty into prosperity.

– Andrew Yang
Photo: Flickr

Potential Rise in Poverty Among OPECThe drastic plunge that oil prices have taken from record figures of over $100 a barrel, down to averaging between $40-$45 a barrel, has left the economies of several OPEC countries beleaguered.

A potential rise in poverty among OPEC (Organization of the Petroleum Exporting Countries) is expected as oil is indeed the cornerstone of a majority of their exports and revenue has swung drastically since 2014.

The combined effects of excess supply and competition among markets over the years have impacted OPEC nations like Algeria, Nigeria, Venezuela, and Iraq. The economic uncertainty has deterred these large developing economies adversely.

An estimated 250,000 jobs have been lost as a result of the progressive decline in oil prices and many more are threatened owing to the 50 percent drop over the last two years. This crisis will result in a potential rise in poverty among OPEC, with declining national incomes overall.

Moreover, the presence of Boko Haram in Nigeria has also been a factor that is currently impacting its oil exporting capacity. The 50 percent price decline has only fueled this.

To combat a potential rise in poverty and economic instability, the African Development Bank plans to provide loans worth $10 billion by the year 2019 to bolster various sectors, including energy and electricity. Despite Nigeria’s depreciating currency and 70 percent poverty rate, this method can greatly increase investment capacity and attract more investment.

The Abidjan, a bank based in the Ivory Coast, also resolved to provide $1 billion for supporting the Nigerian budget.

A report by Nigeria’s Leadership newspaper has commended its diversification projects as a means to boost economic growth amid uncertainty.

Existing tensions between oil-producing nations have also escalated as a result of the plummet. Many nations argue about freezing and regulating their output. Consequently, mediating between countries is a viable way to ease the pressure. Iraq is currently heading a conciliation with Iran and Saudi Arabia in an attempt for both countries to reach a consensus regarding the crisis.

Ecuador, OPEC’s smallest member, was especially plagued by the plunge in oil prices as the government has to control and curtail public expenditure. The government has looked to OPEC remedy the situation in some way.

President of OPEC and minister of energy and industry in Qatar, Mohammed Saleh Abdulla Al Sada, is also working actively to agree upon a benchmark price and output level for all countries to adhere to. A renewed benchmark output of 32.5 million barrels has recently been discussed. This could alleviate the price volatility and circumvent a potential rise in poverty among OPEC countries.

Similarly, Algeria has also been a strong advocate of cutting production among OPEC nations as a means to raise oil prices again. Algeria is expected to see a 3 percent drop in its GDP this year.

Furthermore, political and economic turmoil in Venezuela, owing to the oil price decline and President Nicolas Maduro’s ration laws has resulted in food shortages and a 700 percent crippling inflation rate. Venezuela already has a concurrent poverty rate of 32.1 percent.

However, many neighboring countries like Chile, Peru, Argentina and Colombia are in the strategic position to aid the people and reach out to Maduro. Peru’s President Pedro Pablo Kuczynski recently called upon leaders to engage in the situation.

He believes that Peru’s pharmaceutical industry can be effectively used to help the country. Venezuela’s democratic Unity Alliance also echoes this view. Foreign aid is the only sustainable way for Venezuela to find its way through this major economic and financial bulwark.

Overall, a potential rise in poverty among OPEC countries may be the outcome of the drastic tumbling oil prices. It is vital that countries comply with OPEC proposals and guidelines to safeguard the interests of the economy and the people.

Shivani Ekkanath

Photo: Flickr