The crescendo of news pointing to 2020 as the date to watch is growing apace…. it won’t be the year collapse happens, because collapse is a process, not an event; but it will definitely be the year this process starts to become obvious. To people other than followers of this blog at least…!
RIYADH, Saudi Arabia —According to the International Monetary Fund, Saudi Arabia’s economy is in danger of collapse as oil prices grow increasingly unstable.
The warning appeared in the “Regional Economic Outlook” for the Middle East and Central Asia published on Oct. 15, an annual report published by IMF economists. Adam Leyland, writing on Oct. 23 for The Independent, explained the grim prognosis for Saudi’s economy, which is almost completely dependent on fossil fuels:
“[T]he IMF said that the kingdom will suffer a negative 21.6 per cent ‘General Government Overall Fiscal Balance’ in 2015 and a 19.4 per cent negative balance in 2016, a massive increase from only -3.4 per cent in 2014.
Saudi Arabia currently has $654.5 billion in foreign reserves, but the cash is disappearing quickly.
The Saudi Arabian Monetary Agency has withdrawn $70 billion in funds managed by overseas financial institutions, and has lost almost $73 billion since oil prices slumped, according to Al-Jazeera. Saudi Arabia generates 90 per cent of its income from oil.”
Tax-free living will soon be a thing of the past for Saudis after its cabinet on Monday approved an IMF-backed value-added tax to be imposed across the Gulf following an oil slump.
A 5% levy will apply to certain goods following an agreement with the six-member Gulf Cooperation Council in June last year.
Residents of the energy-rich region had long enjoyed a tax-free and heavily subsidised existence but the collapse in crude prices since 2014 sparked cutbacks and a search for new revenue.
Author Dr Nafeez Ahmed, a Visiting Fellow at Anglia Ruskin University’s Global Sustainability Institute, is making even more waves today, saying………:
“Syria and Yemen demonstrate how climate and energy crises work together to undermine state power and fuel terrorism.
“Climate-induced droughts ravage agriculture, swell the ranks of the unemployed and destroy livelihoods. Domestic oil depletion undercuts state revenues, weakening the capacity to sustain domestic subsidies for fuel and food. As the state is unable to cope with the needs of an increasingly impoverished population, this leads to civil unrest and possibly radicalisation and terrorism.
“These underlying processes are not isolated to Syria and Yemen. Without a change of course, the danger is that eventually they will occur inside the US and Europe.”
- Global net energy decline is the underlying cause of the decline in the rate of global economic growth. In the short term, slow or absent growth in Europe and the US is complicit in voter discontent and the success of anti-establishment politicians.
- Europe is now a post-peak oil society, with its domestic oil production declining every year since 1999 by 6%. Shale oil and gas is unlikely to offset this decline.
- Europe’s main sources of oil imports are in decline. Former Soviet Union producers, their production already in the negative, are likely to terminate exports by 2030. Russia’s oil production is plateauing and likely to decline after 2030 at the latest.
- In the US, conventional oil has already peaked and is in sharp decline. The shortfall is being made up by unconventional sources such as tight oil and shale gas, which are likely to peak by 2025. California will continue to experience extensive drought over the coming decades, permanently damaging US agriculture.
- Between 2020 and 2035, the US and Mexico could experience unprecedented military tensions as the latter rapidly runs down its conventional oil reserves, which peaked in 2006. By 2020, its exports will revert to zero, decimating Mexican state revenues and potentially provoking state failure shortly thereafter.
- After 2025, Iraq is unlikely to survive as a single state. The country is experiencing worsening water scarcity, fueling an ongoing agricultural crisis, while its oil production is plateauing due to a combination of mounting costs of production and geopolitical factors.
- Saudi Arabia will face a ‘perfect storm’ of energy, food and economic shocks most likely before 2030, and certainly within the next 20 years.
- Egypt will begin to experience further outbreaks of civil unrest leading to escalating state failure after 2021. Egypt will likely become a fully failed state after 2037.
- India’s hopes to become a major economic player will falter due to looming food, water and energy crises. India’s maximum potential domestic renewable energy capacity is insufficient to meet projected demand growth.
- China’s total oil production is likely to peak in 2020. Its rate of economic growth is expected to fall continuously in coming decades, while climate change will damage its domestic agriculture, forcing it to rely increasingly on expensive imports by 2022.
I wish Julian Simon could read this….. it seems all our limits to growth chickens are coming home to roost, and very soon now.