Low Oil prices, Islamic State, Mahdi Army, and Ebola means Saudi Arabia and others must prioritize

For drivers with strained budgets, the sight of falling gas prices is truly a miracle while there is no better treatment for the shellshock of last winter’s frigid weather than lower heating costs.  With that in mind, the collapse of energy prices has consequences that reach far and wide.  For many, lower energy prices are a boon, yet others look at those falling prices at the pump and see a market crash threatening their economic stability.

Where oil and natural gas producers could be seriously hurt if oil stays too low, too long, the world should expect the alternative energy sector to face a similar problem when the long-term savings of wind and solar equipment can no longer compete with the low upfront costs of carbon-based fuels.

Aside from decreasing energy costs of consumers in need of extra dollars to spend as the US economy struggles with growing economic disparity, the collapse of energy prices also has international benefits.  For Russia, diminished oil revenue clearly compounds the issues of its recent economic problems.  At the moment, however, this is largely seen as a positive development due the efforts of the West to punish Russia with economic sanctions for its involvement in the Ukraine Crisis.

On the other hand, the impact of depressed oil prices in the Middle East is more of a negative.  Where less oil revenue means official corruption and misallocation of public funds in oil rich countries in the era of the Arab Spring Revolutions becomes more noticeable and less tolerable, which is beneficial to the region over time, smaller national budgets equals less willingness to spend on new priorities.

Given the national and regional security interests of Middle Eastern countries has been neglected in favor of relying on outside help and ignoring problems, efforts to take on globalized terrorism, including the Islamic State, could be hampered in the near future.

Looking at Saudi Arabia, which is the largest producer of the powerful OPEC oil cartel and the government most willing to spend on regional security, the Kingdom may have over 700 billion dollars in reserve, but a lack of economic diversity and overreliance on socialist programs to provide for its People put the regional leader at risk. 

The Saudi government needs 83.60 dollars a barrel in oil revenue to support its budget,  which has only been growing, yet its ability to produce a barrel of oil for somewhere between five and ten dollars , or lower, a barrel means there is little the Kingdom can do in the interim to increase its profits from oil.  As such, Saudi Arabia must mitigate the impact of lower oils prices by decreasing waste, abuse, and fraud in its budget wherever it can find it while it must seek out smarter ways of prioritizing spending.

As the Middle East is in an era of terrible instability, the Kingdom must also avoid budget cuts that deprive those dependent upon the government for their needs until those needs can be provided for by private sector development.  Building an economy capable of providing for a population’s needs takes time.  Of course, the heightened threat of terrorism also requires increased spending in order to deal with national and regional security crisis.

Looking at Nigerian government’s willingness to accept a ceasefire deal with terrorist group Boko Haram, it is obvious governments feel pressured to “keep the peace” and avoid necessary confrontations when terrorists are capable of fending off the national army as they terrorize the Peoples of the region.  This incentive is particularly strong when a weak nation, such as Nigeria, is faced with a crisis like Ebola.  Given Middle Eastern countries have tended to opt for complacency when it comes to terrorist groups favorable to their interests, there is a very real concern that economic pressure, as well as potential threats like Ebola and Middle Eastern Respiratory Syndrome, will break the momentum of newly mounted efforts to address terrorism.

Fortunately, the Sunni-ruled Saudi Arabia has been increasingly supportive of efforts to deal with the Sunni terrorist groups the Islamic State and Al-Qaeda.  With the threat of Shia rebels in neighboring Yemen, Saudi Arabia may be forced to defend itself and its neighbors against threats other than the Islamic State.  Just as turkey faces backlash for failing to support Kurds against the Islamic State and Iraq’s Shia majority risks provoking further sectarian violence between Sunnis and Shiites, the Kingdom must be careful not to enflame additional unrest in the region by overreacting or inappropriately reacting in an polarizing manner.

Unfortunately, the Middle East is stuck in a vicious cycle of instability.  Civil unrest and extremism are fueled by a lack of responsive government, yet governments under siege tend become more defensive. 
In accordance, they often tend to react by spending more on efforts to corral unrest and less on actual security threats as well as economic development.  The added effort to protect leadership interests above all else shifts the focus away from what their Peoples’ needs and wants.  Moreover, less oil revenue is sure to make it harder to spend money in the Middle East on civil investments that can help break this degenerative cycle while the latest war on terrorism may be derailed just as it was getting started.