One of the curses of nations that export their resources is a dependence on the stability of other countries’ currencies. No group of states understands this better than those of the international oil exporters group Opec.
Until 2008, all was good for Opec’s members, oil prices climbed steadily to $147 a barrel and demand soared on the back of an unprecedented global economic boom. Europe and the US were enjoying a period of prolonged prosperity, buying as many goods as emergent Asian nations led by China could produce.
Opec state coffers swelled, and countries like Kuwait, Saudi Arabia, the UAE and even smaller producers like Qatar, poured money into development projects.
But the global financial crisis of 2008, which started with the collapse of the US subprime mortgage market, showed oil prices and consumption had largely been propped up by a speculative real estate bubble in the US, itself underpinned by vast flows of easy credit. But after peaking in July 2008, oil prices tumbled as fears grew over the global economy.
At the same time, the Opec member states cut their overall output by 4.2 million barrels a day (b/d) to 24.85 million b/d in the hope of stabilising prices. In March 2009, MEED estimated that the cartel’s overall daily income from oil had fallen by around two thirds, from $3bn in 2008 to $1bn.
The Opec countries were, of course, not directly responsible for the collapse of the US housing market, nor for the global financial crisis. But they had to suffer its consequences. And as long as they remain dependent on overseas demand, currencies, and economies, they will have to be prepared to pay the price for foreign crises.