In June of 2014 a single barrel of oil cost $114, today the price is just $68. This drop is far beyond the usual fluctuations of this raw material and beyond the prediction of pessimistic defenders of peak oil theory, that we are about to have a severe shortage since petroleum is always running out.

The truth is that there are many different factors that may suggest that the price of petroleum is going to remain low for quite some time. This is mainly due to 2 reasons:

First is the constant improvement of energy efficiency meaning that we have a lesser need for energy. This is logical when you think the groups of OECDs that’s the worlds wealthiest countries are using the same amount of primary energy as they did in the year 2000 while they’re producing 30% more.

The 2nd reason is innovation and technological development, a field of expertise which is inherent to human evolution. This is a development that has occurred on two fronts, both in fossil fuels as well as renewable energies. The best example of this might be fracking, this is a technology that has provided the world with a large amount of oil and natural gas.

In fact, this technology alone has led to the US doubling its Oil production and currently producing more oil than it has since the 1970s. The reduced price of oil has been an incredible setback for Persian Gulf countries where 85% of their revenue relies on this resource.

Up until now this has allowed for the payment of all kinds of bills, citizens have got used to high levels of subsidies & allowances whilst also getting used to not having to pay any taxes. Oil has subsided everything water, electricity, fuels, low interest loans. Citizens have also got used to the idea they have the right to a well-paid civil service job.

Furthermore, countries in the Persian Gulf have gotten used to spending an enormous amount of money on guns. In fact, they expense so much money on weaponry that Saudi Arabia now spends more on its military than Russia, this makes it the country with the 3rd largest military budget in the world.

Further we all know that oil money has contributed to the funding of pro-Islamic campaigns all around the world. However, these pre-existing policies have become completely unsustainable due to the drop in the price of oil. In fact, in 2015 alone oil producing countries lost 360 billion dollars in oil revenues. And this is all because of the hard drop in the price of oil.

Now don’t get me wrong they still do get an enormous amount of money from oil, Saudi Arabia gets $5,500 income per capita from their so-called “Black-gold”. But despite this still significant amount of income they are unable to maintain all of the subsidies they’ve established. Because of this scenario all countries in the Persian Gulf are announcing ambitious plans to diversity their economies.

This will allow them to get some distance from their economies completely relying on oil, looking to follow Dubai’s example as one of the only countries to successfully transition away from a totally oil based economy in the last 40 years. (just 1% of Dubai’s GDP derives from Oil).

Because of this diversification away from oil, the emirates are becoming a world leader in terms of tourism, trade & logistics. 10s of millions of dollars are being invested into Qatar with the hope it will become an economy of knowledge, they proudly show off their “education city” development, a huge academic complex where some of the most prestigious schools in the world can be found. There also notable researchers working there with an almost limitless research budget.

However, the most archetypical case is the one we find in Saudi Arabia, one of the world’s most suffocating and terrifying counties. Human rights in Saudi Arabia are nothing more than an illusion. Women are forced to marry underage (although women have recently been allowed to drive: Big Wow), dozens of executions occur every year and torture is rather routine.

Further the country has even banned theatres and nightclubs. In Saudi Arabia religion & fundamentalism are more important than anything else. But their economic crisis cannot be escaped and today they are facing a very complex situation.

In 2015 the deficit was 15% GDP and continued into 2016 & 2017, this is threatening to swallow up all the money they saved during the black gold years. Also, unemployment is becoming a major concern, and this is no truer than amongst young people, the unemployment rate reached 40% in 2017. Therefore, in April 2016, prince Mohammed Bin Salman (see below), the strongest man in the kingdom announced an ambitious reform plan known as “Saudi Vision 2030”. The goal of this reform plan is nothing less than to transform the countries economy completely.

The plan aims to achieve total independence from oil by 2020 and become one of the most globally competitive economies by 2030. The first step of this starts by privatising Aramco, this is one of the worlds largest companies which controls 10% of global oil production with an estimated value 5 times that of Apple. With all the money from that privatisation, addition of foreign reserves, other privatisation of public companies and its real estate, Saudi Arabia wants to build a sovereign wealth fund with an estimated worth of $2 trillion.

This will allow them a more predictable and stable income than that they are currently getting with oil, they also want to eliminate many of the subsides which are currently threatening their economy and invest in new sectors like, mining, finance, and importantly the military industry.

New taxes are also going to be introduced as a new earning of revenue for the government. The prince also wants to change the higher educational system which is currently closer to the Quran and develop it to meet more modern market requirements. But they big question must be….

Is Saudia Arabia going to succeed ?

It is no easy task to quickly become an industrial power and it is unlikely tourists are going to be drawn to a country which people are regularly stoned to death for adultery or homosexuality. However, all of that said, Saudi Arabia’s success will benefit the world no matter how repulsive we personally find their polices, 70% of the population is under 30 years old and they will require 2 million jobs over the next 10 years. We all know that when frustration, unemployment and religious fundamentalism add up the consequences can be truly dangerous to us all.

Dubai has proved that moderation and capitalism can lead to changes in fundamentalist regimes, we can only hope that Saudi Arabia can follow the example that has been set by Dubai.