The issue of subsidising energy products was one of the subjects tackled during the sixth annual meeting of the gas summit Arabia held in Abu Dhabi in early February, one presentation was about cutting subsidies and how pricing will increase governments’ revenues and improve economic indices.
A presentation by Platts claimed that the US-led embargo on Iran had a positive impact on the revenues of the Iranian government as it slashed subsidies on refined products.
The presentation called on nations in the Middle East and North Africa to stop subsidising policies that distort the economy and increase consumption.
Though this particular presentation contained a lot of factual evidence, I personally disagree with its findings, as subsidising products is almost the only way that citizens of hydrocarbon-rich countries in the Middle East and North Africa region receive their share of oil revenue.
This sharing of oil wealth, at least in theory potentially aids mainly poor people and those who are socio-economically less well off.
If we look to the recent turmoil in the region, the main reason behind all the protests is the concentration of wealth in the hands of a few corrupt people, and are generally family members of officials and rulers as was the case in Egypt and Tunisia.
In Libya the sons of president Ghaddafi have been recieving kickbacks directly from Libya’s National Oil Company, according to the latest Al Jazeera news reports.
I think that recent protests in the Arab world are a logical reaction and conclusion to years of corruption and the unfair distribution of oil-generated revenues.
The turmoil is signalling the fundamental winds of change in doing business in North Africa and the Middle East. If nothing else, regional governments will be more careful about how and where to spend their oil wealth, and more importantly maintaining a graft-free business climate.
