Prof. Enos M.r. Kiremire
2 May 2008
(Page 2 of 3)
2nd Gulf War, 1990-1991: Oil price increase of about 8%
The 2nd Gulf War (2nd August 1990 to 28th February 1991) had to be brief as it was one-sided with Iraq versus the coalition of 34 countries led by the Allied Forces.
This Iraq-Kuwait war lasted only 7 months and hence had a minor impact on the oil flow and its price. The oil price rose from about US$26 to US$28 per barrel - an increase of about 8%. This was not regarded as an oil crisis. This war had a minor negative impact mainly on the economies of the developing countries.
Oil equilibrium and its life span
Blood is to a human body as oil is to a modern economy. Just as the blood circulation carries oxygen and vital nutrients to every cell of different organs of the body, so does the oil flow carry the vital economic nutrients‚ to every sector of a modern economy.
Just as a slight disruption to the flow of blood causes serious consequences to the well being of a human body, so does any slight disruption to the flow of oil inflict severe economic hardships and suffering to society. Therefore, it is extremely important that the equilibrium of the oil flow is maintained and safeguarded.
Those global fountains and sources of oil are of extremely great importance to a modern economy. Behind the scenes, top think-tanks of giant economies comprising of all types of specialists have estimated that the lifespan of oil which is a non-renewable resource is about 30 years. This revelation has caused a lot of political panic and immense economic rivalry for oil among the economic giants of the world.
Therefore, it is not a coincidence that most of the world's economic giants are well represented in the Allied Forces in Iraq and Afghanistan. You very well know that not a long time ago, Afghanistan was under the armpit of the Soviet Union. Why is Afghanistan so important in this equation of rivalry?
A look at the map shows that it is a major border nation next to another region with vast reservoirs of oil and gas - the Caspian Sea region.
This region is the equivalent of the Gulf region of Northern Europe.
In addition, it borders two important countries - Iran and Pakistan. Hence, Afghanistan is strategically important both in a military sense and as a major transit route for oil and gas. Moreover, as a neighbouring nation to the Caspian Sea region, Afghanistan could be sitting on top of major geological veins and arteries of oil and gas flow beneath its soil. Many of us may recall that during the Iraq-Kuwait war of 190-1991(to be mentioned below) the flow of oil underground between the two countries became a hot issue.
Economic rivalry
Bitter rivalry among big powers for key resources is nothing new. The Berlin Conference of 1884 is a testimony to this. It was about the sharing of territories and the economic spheres of influence peacefully.
Furthermore, a deeper analysis of the main causes of world wars I and II reveals that it was about control of vital economic resources. Thus, the colonies and the so-called protected countries (protectorates) were just pawns in the economic game of rivalry.
The historical developments of former colonies and protectorates have had to endure the bitter legacy of such rivalry. There is a famous saying that, "When two elephants fight, it is the grass that suffers" with a recent addition that even "when the two elephants make love, the grass suffers as well".
The current developments and international focus in Zimbabwe, among other factors, have a direct link to this historical legacy of continued global rivalry for economic spheres of influence.
Alternative sources of energy
Namibian uranium case
As the rivalry for the limited oil resource wages on, a feverish search for new sources of energy is intensified. Hence, the conversion of coal into petrol becomes extremely critical. This is what South Africa did during the oil embargo days. As a result, Sasol is now a giant multi-billion US dollar enterprise. The next vitally important limited energy resource is uranium.
Namibia is ranked third producer of uranium in the world by some websites. Whatever ranking Namibia has, she is clearly ranked among top uranium world producers.
Apart from its potential for energy production, uranium is a critically important element for military purposes. Being in possession of uranium and having the capability to produce an atomic weapon may cause hysteria and even heart attacks in some quarters. Hence, Namibia is or will be highly marked as a country of great strategic importance in the same way as Afghanistan or Iraq, now and in future in view of the dwindling oil reserves measured on the time scale.
It is very likely that whatever Namibia does with her uranium is closely being monitored by the superpowers.
Current oil crisis (3rd oil crisis): Oil price increase of 500%
The CNN announcement of April 23, 2008 gave the price of crude oil as US$120 per barrel. A quick look at the website gave me the price of oil as US$20 per barrel in September 2001. This means that in approximately 7 years, the oil price has increased by 500%! While this price may go down at a later date, its economic destructive shock waves around the globe are very likely to remain for many years to come.
This is principally because the price has to reach its peak and then gradually decline to a stable‚ minimum over a couple of years.
The main factors implicated for the continued oil price increase are the attack on the US economy on 11th September 2001, the continued war in Iraq that has disrupted the smooth oil flow, and the relatively recent strikes in Nigeria coupled with an ongoing mini guerrilla warfare which have affected Nigerian oil flow.
In addition, the war in Afghanistan has had some impact. Another major factor cited is the significant economic growth of Asian countries particularly China and India which have greatly influenced the high demand for oil.
While these factors and many more may be cited, it is in the opinion of the author, that the single major factor affecting the continued oil price is the current Iraq War.
This war has immensely disrupted the oil equilibrium. This has and will continue to cause hardships to many countries worldwide.
Imminent economic hardships of the creeping 3rd oil crisis
As already stated, the economic hardships of the continued extremely high oil price are beginning to bite hard. In addition, these effects are influencing both the political and economical situations in the USA and the Great Britain, the key allies in the unpopular war in Iraq.
In the USA, both bank credit which is linked to mortgages and the New York Stock Exchange are now experiencing a lot of hardships. Thousands of home owners in the US have been badly affected.
This is likely to be accompanied by an increased high unemployment rate. The immediate impact will be felt by the greatest consumers of oil, namely USA (25 barrels per person per annum = 25 bppa), Japan (Japan (14.0 bppa) and Spain (13.8 bppa) and so on.
Similar or worse effects will be experienced in many other countries especially the developing world and will continue to do so for some time to come.
It is the view of the author that for now all these are directly linked to the impact of war in Iraq that has disrupted the oil flow equilibrium.
Conclusion
The Iraq War (2003 - present) was considered to last for a very brief period of a few months as was the case with the 2nd Gulf War. The assumption was that this would cause minimal or no oil crisis at all. But the war has dragged on for more than five years resulting in the just started third oil crisis.
The hardships caused by this crisis are gathering momentum day by day. As we all know, the major underlying force driving the trend of world history today is energy. Since oil is the vital ingredient in the production and provision of the world's energy of today, it will continue to influence the dynamics of world history for many years to come.
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