The COVID-19 pandemic has routed the oil industry and countries that depend on oil. Oil-rich countries have talked about moving away from oil, but it’s so much easier said than done, and many were by no means prepared.
Roger McShane, The Economist’s Middle East Editor, wrote about this in his recent article “There Will Be Pain”. He spoke to Sabri Ben-Achour from Marketplace and the following is an edited transcript of their conversation.
Sabri Ben-Achour: How bad has the coronavirus been for oil-rich countries?
Roger mcshane: I mean, it was pretty bad. I don’t mean to exaggerate it. I mean, when the price of oil futures turned negative earlier in the year, it was obviously really bad. Now he’s bounced back a lot. It’s up to about $ 40, $ 45 for Brent, but it’s still well below the kind of fiscal break-even price for many oil producers in the Middle East. I mean, almost every oil-exporting country in the region needs the price of oil to rise by at least $ 10 to balance their books. So, you know, they’re all in terrible shape when it comes to their budgets.
Ben-Achour: Haven’t countries like Saudi Arabia tried or hoped to move away from oil for years, if not decades?
McShane: Yeah, I mean, if you look around the region, every country has, you know, a reform plan. But Saudi Arabia’s rulers have been talking about diversification for decades, as you say. And there’s more urgency now, there’s been more urgency, I would say, in the last five years. And they started doing things like, you know, by recently increasing the value added tax, other countries cut the subsidies. I would just say that, so far, they are moving fairly slowly. They kind of grabbed the fruit at hand.
This is in part because the public sector remains the main employer in the region, and this in both oil-producing and non-oil-producing countries. And if you look at the Gulf, you know their economies always revolve around oil. And, right now, they’re talking about privatizing a bunch of different industries in order to increase income. And the question that needs to be asked is sort of why have they waited so long?
Ben-Achour: Well, it’s true. I mean, what held them back?
McShane: Partly because it’s really painful, a lot of these reforms. And certainly now they’re going to be harder to do, when the price of oil is so low and there isn’t a ton of money to somehow ease the transition to “less fat” economies. But the crisis also offers somehow, I would say, an opportunity, and there is a kind of urgency, as I said, to somehow build more sustainable economies and more representative governments. But it also means rewriting the social contract. For decades, Arab rulers have somehow accumulated wealth and bought some kind of loyalty by providing free services and government jobs. Now, if all of a sudden they’re going to create fewer jobs in government, and all of a sudden the services are going to cost money, and they’re going to provide less grants, all of a sudden people might think, ” OK, well, you’re asking us to sacrifice but you’re not giving us a voice. We want more voices in this matter, which means a more representative government. And we’ll just see how the Arab rulers react to that.
What happens with the COVID-19 supplementary unemployment benefits?
The latest: President Donald Trump signed an executive decision providing for an additional $ 400 per week in unemployment benefits. But will this help really reach people? It is still not clear. Trump has ordered federal agencies to send $ 300 in weekly aid from the federal disaster relief fund and called on states to provide an additional $ 100. But state budgets are limited as they stand.
What’s the latest on evictions?
For millions of Americans, things look grim. Unemployment is high and moratoriums on pandemic evictions have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years to come. For example, being evicted can make it difficult to rent again. And this can lead to increasing poverty.
Which retailers require people to wear masks when shopping? And how do they apply these rules?
Walmart, Target, Lowe’s, CVS, Home Depot, Costco – they all have policies that say shoppers are required to wear a mask. When an employee confronts a declining customer, the interaction can spiral out of control, so many of these retailers are telling their employees not to enforce these mandates. But just having them will actually make more people wear masks.
You can find answers to other questions about unemployment benefits and COVID-19 here.
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