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A central factor in bringing about the current international economic crisis was the greed of the heads of OPEC. Now, with oil prices plummeting, there is potential for unrest among the OPEC states. Yet in spite of relatively low oil prices, and in spite of the natural gas reserve discovered some 50 miles off the Haifa coast, it is essential that we continue to develop alternative energy sources. We must not allow the depressed prices of the traditional energy sources to suppress the vital ongoing initiatives aimed at transforming Earth into a less polluted place and making the global economy less dependent on black gold.
In recent months, the downward tumble in oil prices has continued. On July 11, the price per barrel stood at more than $147; today it is less than $40 - a decline of more than 70 percent. The heads of OPEC hold feverish consultations, sweating under their gilded robes, but their anguished cries have been seen as no more than a hollow threat. In this international economic crisis of unprecedented proportions, the OPEC countries are unable to stabilize the price of oil.
THE WRITING was on the wall. For years now, many economists have been arguing that the spiraling price of crude was a bubble bound to burst. OPEC countries, however, had become addicted to the fantastic prices the black liquid had attained on the world's stock exchanges. They refused to realize that grossly unreasonable energy prices would lead to a collapse, to a drop in demand and, in the final analysis, to the severance of the branch on which they were sitting.
It is common knowledge that the price of oil is determined by supply and demand. As in the case with any merchandise whose price is determined in the course of trading on the stock market, so too the price of oil is determined on the basis of reports concerning events, wars or crises with the potential of delaying or hampering supply.
The critical rise in oil prices last year was caused, at first, by the decline in the value of the dollar and, at a later stage, by OPEC policies - or, more precisely, by their failure to halt the price rise.
While most of the OPEC leaders were content to sit back and enjoy the drastic increase in revenues, the president of Iran, Mahmoud Ahmadinejad, went a step further. The Iranian leader known for his bombastic pronouncements screamed - back when oil prices were at their zenith - that oil was still too cheap. As expected, the OPEC nations' irresponsibility exacted a lethal price on the global market. The growth which had characterized the market ground to a halt. OPEC leaders will now suffer because of their insistence over the years on creating the illusion of an oil shortage. With the price of oil dropping to almost unimaginable depths, it is now OPEC's turn to pay the price, in terms of economic instability, social crises and possibly even political instability.
A CRISIS of similar dimensions occurred in the wake of the oil embargo of the 1970s, when the Gulf countries had to make dramatic cuts in their budgets and in the services they provided their citizens. In the 1980s, as a result, Saudi Arabia experienced unrest, especially among the Shi'ite population in the eastern part of the country, near the country's major oil fields. Riots broke out because of cuts in services - and particularly because of the reduction in the number of workers employed by the state. Their leaders demanded a share of the revenues from the oil wells.
There was unrest, too, though of lesser force, in the other Gulf states. Luciani Giacomo, the scholar who postulated the theory of The Oil Rent, argued that in countries in which there is a steady and significant income from oil, there is no struggle for human rights. The political and social tranquility attained by regimes with a steady income is a result of their ability to fill the needs of their citizens, generally free of charge. Conversely, a drop in oil prices is liable to bring about social and political unrest.
So long as the export of oil pumps billions of dollars into the oil states' coffers, they are able to meet their masses' basic needs. And so long as they are well fed, people are not overly bothered by the ostentatious behavior of their leaders and by their grotesque palaces. However, when people are deprived of income, when there is no pita and no plate of beans in the house, the shameless extravagance of the leaders suddenly becomes very prominent.
While the world was hit by the rise in the price of oil, the Gulf states enjoyed tremendous prosperity and engaged in the erection of spectacular construction projects, such as artificial islands and superstar hotels. But now it looks like we're in for a decline in the motivation of potential buyers to acquire real estate on the artificial islands of Dubai, to pay more than $10,000 a night for a room in the Bourj el-Arab Hotel or to purchase or rent office space in buildings going up in these countries.
NOW IS the time to continue developing alternative sources of energy. We must not let the declining price of oil interfere with the highly welcome initiatives aimed at transforming our planet into a cleaner and less polluted place. To this end, it will be very important to generate governmental support for projects designed to promote new technologies in alternative energy.
While we draw no satisfaction from the suffering of the OPEC states, one cannot but feel a measure of relief at the possibility that, as a by-product of this situation, there will be a curtailment of the budgets allocated by Iran for its terrorist proxies in various parts of the world - and particularly on our northern and southern borders.
The writer is chairman of the Forum for a Smart Middle East and formerly head of Israel's mission in Qatar.