The rise of oil prices over the last few months has been shocking. That the cause is the Arab spring is a no-brainer. But it’s not just because Arab countries can’t produce oil while everyone is out protesting and counter-protesting. It’s because keeping a restive population down costs a lot of money. Which means that the equation of how much OPEC needs to sell oil for has changed.
A new report from PFC Energy notes that oil producing countries need more income than they have in the past. One technique of the countries that haven’t yet had successful popular uprisings (like Jordan, Saudi Arabia, Bahrain), is that the government is just throwing money at its citizens. Bahrain, for instance, dropped $2,650 on every single family. When that didn’t work so well, though, they started killing people. Perhaps more effective? A rich(er) citizen, goes the logic, will be more comfortable with a life of no freedoms. But these Gulf oil states aren’t made of money, and all those police and tear gas isn’t cheap either. They have to add in the price of citizen mollification to how much we pay for our gas.
And, as the report notes, the continued outlay of cash to keep people marginally happy might mean oil at a baseline of $90 a barrel going forward. As of this moment, it costs $113, and $90 seems downright cheap. But remember that for a large portion of the last five years, we’ve lived with oil well below that price. As you grumble about the price of your tank, remember it’s not just unrest in the Middle East that’s making you pay more, it’s the bought-and-paid-for stability in the Middle East, too.