Petr Aven predicted the fall of the “oil of Leviathan” from the invisible hand of the market


The Chairman of the Board of Directors of Alfa Bank Petr Aven, head of laboratory Institute for economic policy. Gaidar Vladimir Nazarov and economist Samvel Lazaryan wrote an article “Twilight of the Petrostate” (Sunset petrostates), which was published on the website of The National Interest. In it, the authors talk about the future of those countries which put their well-being dependent on oil prices.

In such countries the authors of the article counted two dozen. Some of them (Gulf countries) fully live by the oil and gas sector — the share of oil, gas and petroleum products (ITG) there is more than 50% of GDP and the budget is based on oil revenues. In 15 countries, the proportion of IFG in exports is more than 50%.

In recent decades, oil-producing countries grew rich faster than others: GDP per capita increased, and the rate of growth exceeded the world average. In terms of GDP in US dollars, the rise in world oil prices in 2011 Russia and Kazakhstan is ahead of Malaysia and Turkey, Saudi Arabia and Equatorial Guinea almost overtook South Korea, Kuwait toured the UK, and Qatar has become one of the three richest countries in the world.

“A new generation of political elites of these petrostates took the oil rent as a way to achieve our goals,” the authors write. However, many experts believe the oil money is not a blessing but a curse, they add.

Economic growth, not caused by technological progress, investment and hard work, but only large amounts of mineral resources, has its side effects, including degradation of political systems, the strangulation of competition and the proliferation of populist fiscal policy, the authors of the article.

“The awakening from this sleep is now inevitable,” they write, adding: “Very little doubt that the transformation of oil in common that do not generate annuity product, will change the world.”

Later in the Chapter “the Invisible hand of the market against the oil Leviathan” Aven, Nazarov and Lazarian write that in the history of mankind had plenty of examples of the conversion of certain goods of “rent”, that is able to bring its owner a profit only by the fact of belonging to him in the ordinary, the price of which is determined by the cost of production. The examples the authors of the article called the land rental component of which has declined over many millennia, as well as furs and natural rubber.

Each time the reason changes in the value of the product is becoming technological progress — consumers could get a similar merchandise for a lower price or as a result of the discovery of new deposits increased offer.

With oil, according to the authors of the article, now the same thing happens. In their opinion, the oil consumption is falling because of the fact that the economic development of the States is ensured at the expense of more energy efficient sectors, and even the decline in oil prices does not compensate for the loss of her attractiveness.

The authors note that the development of alternative power, globalization of the gas market, the development of electric cars and the fashion for energy efficient solutions does not promote growth of demand for oil. “This means that the business, which yesterday relied on government subsidies to survive tomorrow, even in conditions of cheap oil will become profitable,” say the authors.