WIll Falling Oil Prices Re-Invigorate the Arab Spring

There are many causes of the Arab Spring, and lack of jobs and youth unemployment were certainly high among them. When oil prices are high, its great for the oil rich Gulf states, but as oil heads to less than US$30 a barrel, the macro-fiscal environment considerably worsens leading to lower public spending on services and infrastructure.  For oil importers, its basically good news, lowering transaction costs and increasing profits.

The proposed Arab Stabilization Plan (ASP) made a pitch for massively ramping up investments in infrastructure and promoting gainful employment.  While the ASP was widely supported, the complexities of the MENA region made it very difficult to use fiscal surplises in fiscal deficit locations. For the Gulf states, excluding (but still affecting) the UAE, countries need to cut public spending or increase levels of debt.  Either way round, even if the social contract and economic policies remain favorable, a rising tide of jobs and improved income is critical for keeping people vested in maintaining stability.  However, there must be a contingent fear now that the lowest oil prices since 2004 could provide a future spark for continued unrest.

The population of the MENA region is to double, and given environmental and jobs related pressures, this population is already spinning out into Africa; perhaps also into Europe. With the majority of the world's population living in cities, accelerating urban based growth has never been more important.  However, there are few countries in the MENA region with robust growth policies, and history is therefore largely being determined by inaction.

The Arab Stabilization Plan can be veiwed at: www.arabplan.org/