Egypt's PM, US secretary of energy mull cooperation in energy, electricity    Egypt's PM meets US vice president Pence    IMF downgrades global economic growth forecast to 3%, lowest level since 2008    We hope to strengthen ties with Egypt: Albanian president    Moroccan film Nomades scoops awards in Alexandria Film Festival    Egyptian Arab Land Bank to up funding into nonbanking financial firms    Turkey says its forces holding part of Syrian NE    Bulgarian PM urges soccer chief to resign after racism furore    England made a big statement against racist abuse, says Southgate    Dutchman Vorm returns to Tottenham as goalkeeping cover    Clashes over Catalan separatists' convictions injure 170    British police order a halt to climate change protests in London    Brexit deal ‘more and more difficult' this week, EU summit to discuss delay    Sisi congratulates Tunisia's new president for win, hopes for more cooperation    Dollar loses steam versus yen as trade deal, Brexit hopes face reality check    Oil falls as weak China data compounds partial trade deal doubts    Egypt's comprehensive health insurance system doesn't set spending cap on services: Finance minister    Toshiba's JV with Egyptian Elaraby opens regional HQ in South Africa    Six authors vie for Booker prize 2019, Atwood in the lead    In Photos: A sneak peek into rehearsals for the Cleopatra ballet world premiere    Saudi visit showcases Putin's growing Middle East influence: Reuters report    Trump prepares to impose sanctions on Turkey    Egypt spares no effort to boost cooperation with Sudan: Egyptian ambassador to Khartoum    Sisi, Ethiopia's PM to meet in Moscow to discuss GERD issue    Sisi: army engaged in attrition phase against terrorism in Sinai since 2013    Egypt's Sisi, Ethiopian PM to meet in Moscow to discuss GERD issue    'Alarming upsurge' in measles has devastating impact, WHO warns    Vitamins, omega-3 supplements improve autism symptoms    10K fans to attend Egypt's friendly against Botswana in Alexandria: EFA    Sisi, Ethiopia's PM agree to overcome obstacles in Nile dam talks    Why vacations are important for health    A brief history of the Cairo Opera House    Egypt's Zamalek president hopes 80,000 supporters attend Generation Foot match    Farwell to Egyptian comic actor Talaat Zakaria    Eating fish is linked to better sleep, higher IQ    Egypt's Rowad Modern Engineering renovates 40% of Manial Palace    Court sentences six to death, 41 to lifetime imprisonment violence related case    Trump says he would release Mideast peace plan after Israeli elections    ACWA Power compares 3 bids to supply production units for Luxor power station    What do you know about gold alloying?    NBE announces EGP 2.5m prizes for handball youth teams for their world achievements    Jennifer Lopez evokes Egyptian outrage post her North Coast performance    Al-Sisi honours Egypt's scholars on Science Day    IS claims responsibility for suicide bombing killing 63 in Afghan wedding    Political parties gear up for parliamentary, senate, local elections    Unprecedented Glory: Egypt win Men's U-19 World Handball Championship    12th National Egyptian Theatre Festival fuel up public theatre art scene    Ministry of Environment has a plan for "black clouds season"    

Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.

Rebel Economy Wrap
Published in Daily News Egypt on 28 - 10 - 2012

The oil curse explained
Farah Halime
By Farah Halime, Rebel Economy
This is the final instalment of the “Eid Holiday Reading Special" to mark the last day of the Islamic holiday of Eid Al-Adha, and before we are back to work tomorrow.
Why does oil wealth so often become a curse for developing states? In the developing world, oil-producing states are fifty percent more likely to be ruled by autocrats, and more than twice as likely to have civil wars, as non-oil states. They are also more secretive, more financially volatile, and provide women with fewer economic and political opportunities. For the last thirty years, good geology has led to bad politics.
That's the opener to a succinct and useful read by Michael L. Ross (author of The Oil Curse: How Petroleum Wealth Shapes the Development of Nations) on the politics of oil. His piece, if applied to the Middle East, explains a lot about the energy problems oil economies face. Also try replacing some of the examples quoted with Egypt's state oil company, the Egyptian General Petroleum Corporation (EGPC), and see where you get.
The crux of the article and Ross's book is based on the four “S's" of oil: scale, stability, source andsecrecy. He also explains the pros and cons of the wave of nationalizations that swept oil companies throughout the developing world during the 1970s:
In some ways, nationalization was a giant step forward for oil-producing countries: they gained greater control over their national assets; they began to capture a much larger share of the industry's profits; and in the 1970s they were able to raise world prices to record levels, causing an unprecedented transfer of wealth from oil-importing states to oil-exporting ones.
The revolution in energy markets gave the oil-rich governments greater influence than they could have imagined.
But for their citizens, the results were often disastrous: the powers once held by foreign corporations passed into the hands of their governments, making it easier for rulers to silence dissent and hold off democratic pressures
He ends on a positive note: “much can be done to alleviate the oil curse". Take this, for example:
Countries can better manage the size and source of their revenues by, for example, extracting their mineral wealth more slowly, giving citizens a regular cash “dividend" from their oil revenues (like Alaska), using barter contracts, or partially privatizing their national oil companies (like Brazil). To improve the stability of their revenues, they can use traditional stabilization funds, or—better still—oil-denominated loans.
But what's the best and most immediate solution?
“The one remedy that can help everywhere is greater transparency in how governments collect, manage, and spend their oil revenues," Ross writes.
On that note, for those that consider EGPC's debts as totally separate to the country's budget and the country's external debt pile, think again.
Egypt's oil company is nothing but an opaque, heavily indebted mess, that is misspending billions of dollars to fund both an inefficient energy subsidy network that is struggling to meet domestic demand, and pay off debts to oil companies and banks.
Egypt's external debt does not just stand at about $33 billion, you can count at least another $20 billion owed to international and domestic banks and oil companies for years of mismanaging energy subsidies.

Clic here to read the story from its source.