It is a very dangerous game to try and predict what will happen next in the Middle East and North Africa at the moment, so I report this with all the usual caveats. But John Roberts, an energy security specialist at Platts, has been watching the region for a long time, and he thinks that the possible removal of Muammar Gaddafi blows apart a lot of long-held assumptions about the region.
The key assumption as far as Libya was concerned was that with high oil revenues and a small population, Gaddafi was safe. If trouble started, he could always bribe people into remaining quiet – as he appears to have done recently, reportedly increasing wages and loans on offer to Libyans.
But it seems now that people want more than just financial security and the stability that comes with high oil revenues: they want freedom. And if they want that in Libya, which has a GDP-per-capita of around $12,000, why shouldn’t they want the same in Saudi Arabia, whose income per head is only slightly higher at $14,000 a year?
If you look at Libya right now, something like 56 per cent of per capita income is directly attributable to oil. The government directly controls most household budgets.
It should be able to buy people off in the way that the Kuwaitis have done and the Bahrainis are now seeking to do, by raising incomes and increasing subsidies.
Whatever the Libyans are doing on this front is not working – the people want more. Simply having availability to cash doesn’t bail you out.
If that is the case with Libya, which has a comparible ratio of income to population to Saudi Arabia, one might worry more about the stability of Saudi Arabia, which is of course the big one.
Saudi Arabia is the “big one”, of course, as far as oil production is concerned, producing around 8.3m barrels a day of crude, much more than any other single Opec member. This could send the oil price spiralling, with the consequences warned of by Fatih Birol today, at least until the political situation settled down again.
But Roberts also had some reasons why Saudi Arabia might be different (a good idea, given the volatility of the situation). The country has stable remittances which come from returns on overseas investments. These remittances are often distributed to the heads of families tied to the regime, giving more people a significant stake in the structures that maintain that society. Finally, he says:
It might help having 6,000 princes in the royal family – some of them might have their ear to the ground.
Whichever way the balance tips, the trouble in Libya has shown regional commentators that many of the old assumptions about Middle Eastern oil are completely wrong.