http://www.theglobeandmail.com/report-on-business/commentary/jeff-rubins-smaller-world/soaring-oil-prices-a-double-edged-sword-in-the-middle-east/article1915636/">Soaring oil prices a double-edged sword in the Middle EastWhy is the Arab world convulsing with social and political unrest when triple digit oil prices should be bringing enormous wealth to the region? The answer may be that the link between energy inputs and food prices suddenly makes soaring oil prices a double-edged sword in the world’s largest food importing region.
The problem facing Arab countries today is higher oil prices feed directly into higher food prices. While oil may be massively subsidized in the Middle East, it’s not in major grain exporting countries such as Canada, Russia and Australia that Arab nations increasingly count on for their food supply.
From the diesel fuel that runs tractors and combines to the power needed to pump water through irrigation systems, modern agriculture is one of the most energy intensive industries. And the Middle East is the largest food importing region of the world. As the price of oil goes up, so does the price of food imports.
Population growth in the Middle East is rapidly outstripping the carrying capacity of the land. Democratic reform may be what is on the protestors’ lips but demographic reform is at the heart of the region’s problems.
There's an interesting insight to be drawn from the article. The severity of the net oil export problem (aka the Export Land Model) is predicated on rising domestic consumption reducing the surplus oil available for exports. Rising consumption is aided by subsidies as the rest of the economy is plundered to make oil consumption more affordable. This exacerbates the decline in exports, and will lead to a faster draining of the world oil market. On the other hand, if governments don't subsidize domestic food and oil, they risk being overthrown by their own people. This sword has more than two edges, I think.
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