If there is anything resembling a silver lining in the current financial crisis, it is that the worldwide price of oil has fallen to around $70 a barrel, about half what it was some three months ago. Gasoline prices, which always lag behind oil prices, have begun to drop as well.
This is not only a boon to motorists — and to those living in colder climates who are going to need heating oil this winter — it has a strong potential of making the world at large a slightly less dangerous place.
Three countries in particular, Venezuela, Iran and Russia, have used a good deal of the money they acquired when oil prices were much higher to bolster their ability to make mischief. If international oil prices stay (relatively) low, they are likely to be less troublesome than their leaders had hoped they could be.
It has been especially gratifying to see Venezuela, led by the self-styled socialist and Yanqui-baiter Hugo Chavez, have to trim its international sales. Chavez has been crowing that the financial crisis marks the death of capitalism in the U.S., apparently forgetting for a few moments that his own country’s relative wealth of recent years has been financed almost entirely by petroleum exports to the sinister capitalist running dogs in the country he was berating.
President Chavez’s efforts to jump-start what he sees as socialism — a wide array of social programs, beefing up security forces to squelch opposition, increasing employment at the nationalized oil company — have been possible mainly because of the oil boom. He has also used the windfall to subsidize allies in the hemisphere like President Evo Morales of Bolivia, provide subsidized oil to Caribbean countries, and buy weapons from Russia. Now he will have to pay closer attention to the gross inefficiencies nationalization has introduced into Venezuela’s oil industry and scale back his international ambitions.
Iran has used petrodollars to spread its influence in Iraq and the rest of the Middle East, to subsidize Hezbollah and Hamas, to buy off domestic critics appalled at the government’s mismanagement of the economy, and to establish commercial relations with European countries, thus dampening opposition to its nuclear plans. If oil prices stay low, Iran may have to cut back foreign meddling and reach some kind of compromise on its nuclear ambitions. President Ahmadinejad, who has been steadily losing popularity anyway, could well be defeated in next June’s elections.
Russia’s invasion of Georgia this summer (following Georgia’s attacks in South Ossetia) was met with widespread criticism but no effective action. In part this was because too much of the U.S. military is tied down in Iraq, and in part it was attributed to the growing dependence of Western Europe on Russian natural gas. With petroleum and gas prices tumbling and the financial crisis spreading (in part as a reaction to the Georgian adventure), however, Russia has had to dip into “rainy day” funds to prop up its banking industry and stock market. Its overall economy is less vulnerable than Venezuela’s or Iran’s but its ability to intimidate its neighbors will definitely decline.
Most of the Gulf states are reasonably well positioned to ride out a period of lower oil prices, though they might have to scale back some of their more ambitious building and development plans and the United Arab Emirates have dipped into their hoards to rescue domestic financial institutions. But Kazakhstan has had to rescue some banks and Mexico has spent billions defending the peso.
Far be it from us to revel in the pain of others. But it is hardly cause for lamentation when countries that have ambitions to stir up trouble in the rest of the world and/or harm the United States find they don’t have quite the resources available that they had expected.