Feb
2011
Oil, Revolutions and Wordsworth: What 1789 tells us about 2011
Bliss was it in that dawn to be alive,
But to be young was very heaven!–Oh! times,
In which the meagre, stale, forbidding ways
Of custom, law, and statute, took at once
The attraction of a country in romance!
Revolutions and political upheaval inspire a great deal of confidence, optimism and positive sentiment. William Wordsworth, Ludwig van Beethoven and Robert Burns all felt this spirit in 1789 as the French people swept away an outdated autocratic regime and raised the tri-colour over the city of Paris.
The current turmoil in the Middle East has been similarly inspiring. Only the most cynical seem to be predicting doom. Yet, as with 1789, initially positive reforms driven by liberal sentiments can descend into chaos and violence. Wordsworth himself turned against the French Revolution as hope turned to despair and the terror of the guillotine.
The fate, then, of the ‘Arabian Spring’ is by no means clear; toppling dictators does not de facto lead to universal liberty, fraternity and equality. History seems to back up the reaction of the markets which have pushed oil futures to a 2½ year peak of around $120 a barrel. The brutal repression meted out by Muammer Gaddafi has highlighted the potential for a wintery end to the protests.
Gaddafi’s regime has made a remarkable transition from international pariah to partner of the West in the war against terror, and back, once again, to the status of a ‘mad dog’. While once considered a ‘safe’ investment, due to its quality of oil and proximity to Europe, oil companies are currently fleeing the tumult of the North African state.
Yet the ‘effect’ of higher oil prices is not easily attached to the recent ‘cause’ of a collapse in Libyan production; wider issues are at play. Libya, since the lifting of sanctions in 2004, is still only the world’s 12th largest exporter of oil.
Other extractors, such as the international oil cartel OPEC, suggest they can easily meet supply. It is unlikely that this is a risk free bet, however; part of the rise in oil prices is linked to concerns about Saudi supply lines. These routes pass through three potential flashpoints. The Suez Canal, which has recently seen Iranian naval vessels pass through it, is one. The other two are the Straits of Hormuz and the Bab el-Mandab, which share coast lines with Iran and Yemen respectively.
Finally, it seems unlikely that Saudi Arabia will be completely insulated against civil and political grievances. Today, running on the front page of the Financial Times, King Abdullah announced ‘financial support measures’ worth an estimated $36bn, in an attempt to avert the kind of unrest seen in Egypt and Libya. The package contains pay rises for public employees as well as reprieves for debtors and financial assistance for students and the unemployed.
The Kingdom has made one potentially fatal error here, repeated by regimes from 1789 – 1989: it assumes that revolutions are primarily products of economics. There is clear evidence that protesters in Libya, who continue to defy the bullets of Gaddafi’s militia, are standing against more than the price of bread or the lack of jobs.
