In June 2014, a single barrel of oil cost
$114. Today, its price is around $50. This drop is far beyond the usual fluctuations
in the price of this raw material and the predictions of those pessimistic defenders
of the “peak oil” theory – the theory that we are about to have a severe shortage
since petroleum is “about to run out”. The truth is that there are many different
factors which suggest that oil prices are going to remain quite low for a long while. This is mainly due to two reasons: The first is the constant improvement in energy
efficiency, meaning we have less need for energy. It is logical when you think the OECD economies
– the group of wealthiest countries – use now the same amount of primary energy as they
did in the year 2000 while their production has been a 30% higher. The
second reason is innovation and technological development – a field of expertise inherent
to human evolution. A development which has happened on two fronts:
both in fossil fuels as well as renewable energies. The best example of this might be “fracking”
– a technology that has provided the market with large amounts of oil and natural gas. In fact, this technology has lead to the U.S.
almost doubling its levels of oil production. The US is currently producing more old than
it has since the 1970s. The ecological impact of fracking has been
incredibly controversial, but that is a matter for discussion in a future video. The low price of oil has led to a terrible
setback for the countries in the Persian Gulf where 85% of their income relies on this resource. Up until now, oil has allowed the payment
of all kinds of bills. Citizens have got used to a high level of
subsidies and allowances, and not having to pay any taxes. Oil has subsidised water, electricity, fuels,
low interest loans… Citizens have also got used to having nearly
the “right” to a well-paid job in the Civil Service. Furthermore, countries in the Persian Gulf
have spent enormous amounts of money on guns. They have spent so much money that Saudi Arabia
spends more money on defence than Russia (making it the country with the third biggest military
budget in the world). Further, as we all know, oil has contributed
to the funding of pro-Islamic campaigns all around the world and has paid, as well, for
the construction of mosques. However, these policies have become completely
unsustainable due to the drop in oil prices.  In 2015 alone oil producing countries lost
$360bn in income as a result of the hard drop of prices in this particular raw material. Now, they still do get a lot of money from
oil. For example, Saudi Arabia gets a $5,500 income
per capita from their so-called “black gold”. But despite this high income they are unable
to maintain everything they have committed to. In order to face this changing scenario, all
of the countries in the Persian Gulf are announcing and developing ambitious plans to diversify
their economies and get some distance from oil, following Dubai´s example in some ways
we because, as we saw in a previous video, it is the only case of effective diversification
away from oil in the last 40 years. Because of this diversification the Emirates
is becoming a world leader in tourism, trade, and logistics. Tens of billions of dollars are being invested
into Qatar with the hope that it will  become an economy of knowledge.  Proudly showing off their “Education City”
development – a huge academic complex where some of the most prestigious schools can be
found, with many notably scientists working with almost infinite research budgets. However, the most archetypical case is the
one we find in Saudi Arabia – one of the world’s most suffocating and terrifying countries. Human Rights in Saudi Arabia are merely an
illusion. Women are forced to be marry underage and
they cannot drive. Dozens of executions can occur every year,
and torture is quite routine. This country has even banned theatres and
nightclubs. In Saudi Arabia, religion and fundamentalism
are more important than anything else. But their economic crisis cannot be escaped
and they are facing today a rather complex situation… In 2015, the deficit reached 15% of the GDP
with the situation continuing in 2016 and threatening to swallow up every penny saved
during the “black gold” years in a very short period of time. Further, unemployment is becoming a major
concern, especially among young people, where the unemployment rate reaches the 40%. This is the reason why in April 2016, prince
Mohammed bin Salman, the strongest man in the kingdom, announced an ambitious reform
plan known as “Saudi Vision 2030” the goal of which is to transform the country’s
economy completely. The plan aims to achieve effective independence
from oil by 2020, and transform Saudi Arabia in one of the most globally competitive economies
by the year 2030. The first step for achieving this goal starts
by privatising part of ARAMCO, the world’s biggest company, which controls 10% of global
oil production with an estimated value five times higher than Apple. With all the money from that privatization,
addition of foreign reserves, other privitisations of public companies, and its real state, Saudi
Arabia wants to build a sovereign wealth fund of $2 trillion so they can generate a more
predictable and stable income than that which is currently coming from its oil. All told, they also want to eliminate most
of the subsidies that are threatening their economy and invest in new sectors such as
mining, finance or, more importantly, their military industry. New taxes will also be introduced as an alternative
method of earning for the government. Furthermore, the Prince wants to change further
education, which is currently closer to the Quran, to something that more meets market
requirements. The big question is: will Saudi Arabia succeed? It is not an easy task for a country to quickly
become an industrial power and it doesn’t seem likely that tourists will be willing
to visit a country where it is common to see people stoned to death for adultery or homosexuality… Having said all that, the world would benefit
from their success no matter how dreadful we personally find their political system. 70% of the Saudi population is under 30 and
they will require two million jobs over the next decade. We all know that when frustration, unemployment,
and religious fundamentalism add up, the consequences are 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 successfully
follow the example set by Dubai. So, what do you think? Will Saudi Arabia succeed? Can capitalism encourage moderation in Saudi
Arabia and similar countries? Let us know what you think in the comments
below, and if you enjoyed the video, click like and don’t forget to subscribe to our
channel by clicking the button on the screen now. And I’ll see you in our next video.