1. Lifelong Learning – Temple Beth El
Mark S. LeClair
Fairfield University

2. Goto www.faculty.Fairfield.edu/mleclair Look for link at top of page
To obtain slides:
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3. Economic Impact of Instability in the Middle East
Local impacts – Some estimates indicate Arab Spring cost nearly $100 billion
Global Economic Impacts
World petroleum markets in particular
Geo-Political Effects
Moving Forward

4. Talk will Mostly Focus on Post-2010 Instability
“Arab Spring” and its aftermath
With some attention to the 1970s: The Yom Kippur War and the Iranian revolution

5. Prior to 1973, Little Attention Paid to Middle East
In 1960, a fledgling organization named OPEC was formed
At the time, only five countries were members
Goal was to stabilize and increase petroleum prices
Little impact initially – price of oil was still below $3/barrel in the early 1970s
1973 – Yom Kippur War and the OPEC embargo on the U.S. – oil quadruples in price to $12.60 per barrel

6. 1979 – Taking of U.S. Hostages in Iran
Price of Oil Rises to $44/barrel
In real terms, comparable to the prices we saw in before the economic collapse
Impact of two oil crises
Decade of poor growth in U.S., coupled with high inflation
By 1979, U.S. economy experiencing stagflation
Recycling of “petro-dollars” led to debt crisis in Latin America
Mideast now had our attention

7. Impact of Accumulated Petrodollars
Massive holdings recycled into Latin America
Used to build new infrastructure, but not new businesses that would have provided new export earnings
Result – developing nation debt crisis
Decade of lost growth, high inflation and a damaged U.S. banking system

8. Power of OPEC Exhausted in 1986
Short re-assertion of power in 1998, but some large non- OPEC producers (Russia, UK, Canada) blunt the impact of the organization
Mideast source of occasional instability
Muammar Gaddafi’s support of instability and pursuit of nuclear weapons
Iran’s support of terrorist groups
Unending conflicts around West Bank and Gaza Strip

9. Dominance of Oil Market Made the Region’s Fortunes Important Globally
At peak, U.S. importing about 70% of its oil
Can say we sought other sources, but its just one big pool in the end
If we bought from Mexico instead of Iran, Iranian oil becomes part of the global stockpile of oil

10. Arab Spring Began with Tunisian Revolution in 2010
Spread to Libya, Egypt, Yemen, Syria, Bahrain
Street protests in many other Mideast nations
Governments toppled in Libya, Egypt, Yemen
In strange coincidence, Venezuela also goes into political unrest
Production drops dramatically

11. Impact on Global Markets………
Production in key nations
Libya – “Normal” production approximately million barrels per day
Fell dramatically, if briefly, during the Arab Spring
Production has now recovered, despite continued turmoil
Yemen – never a huge producer, but does have reserves of 4 billion bbls of oil
Production has collapsed

13. Morocco, Tunisia and Other “Non-Oil” Nations
Tunisia: Exports include textiles, clothing, agricultural products
Tourism one of its major “exports”
Arab Spring (and deteriorating security) led to decline in tourism
May take years to recover

15. Morocco
Exports:
Phosphates, textiles and agricultural products

16. Tourism Revenue

17. Current Account and Fiscal Balances - % of Gross Domestic Product
Egypt
Jordan
Libya
Morocco
Tunisia
Yemen

18. Result – Middle East/North African Growth has Fallen Behind Rest of the World

19. Global Impacts
How does the decline in growth affect the rest of the world
Drop in imports affects those industries that sell to the Middle East
Big imports include Machinery, Vehicles, Aircraft and Electrical Machinery
Close to $40 billion in these categories
Instability shrinks these markets

20. Is it Instability, or is it Oil?

21. Difficult to Separate 2 Effects
Mideast is a very different place with $60-65 per barrel oil rather than $120 per barrel oil
Revenue that caused a lot of mischief (particularly from Iran) is smaller
Oil cannot return to higher prices because of fracking

23. Inflation-Adjusted Price of Oil (July 2017 = Base)
Year Price/Bbl $ $ $ $ $ $ 43

24. Recent Development
Moves by Saudi Arabia to adopt more moderate version of Islam
Opening up to Israel
Meeting with Jewish leaders
Women allowed to Drive!
May be recognition that going it alone in a world of cheap oil is not going well
Moderation may dampen instability

25. Conclusion Arab Spring generally bad economically for region
Impacts relatively brief
Did not resolve the political problems of the region (made things worse in Egypt, Libya and Syria)
Global impacts muted
World is a $100 trillion economy
$100 billion drop is 1/10 of 1% of output
Long-term impact of cheap oil will impact region dramatically
Instability in the 1970s much more dramatic

26. Thank you and Questions