Unintended Consequences: Central Banks Policies, Oil Prices and Geopolitics

By Sebastião Buck Tocalino of SBTCapital C. Investimento

Summary

·For a nation without strong democratic institutions and traditions, its oil may come as a political, social and cultural curse.

·With petroleum flowing out of the soil and its elevated global trade price, fiscally free governments neglect their own people.

·The continuous drop in US gasoline sales (an important share of global oil demand) since 2007 was not followed by lower oil prices.

·If the moral hazard of extreme economic policies was already controversial, monetary tampering now involves far more disturbing political consequences.

We have been shocked with the savage executions of James Foley and Steven Sotloff in the Middle East. These cowardly brutal murders reminded us of Daniel Pearl, another American journalist decapitated in 2002, in Pakistan.

These men were not unscrupulous politicians or opportunistic leaders, and not even armed partakers in any combat. They were just reporters, uncommon only in their courage and efforts to expose the political and, paradoxically, "religious" violence that is taking place over there.

The map below was published by the international organization Reporters Without Borders.
Countries were colored according to their local freedom for gathering and providing information.

Not surprisingly, countries where reporters find greater difficulties have serious democratic problems. But it is also interesting to note that many of these economies depend heavily on their exports of nonrenewable geological resources - especially oil and natural gas.

Over the years, as fossil fuels brought more economic power to governments of these countries, its effect on individual and democratic freedom, as well as cultural tolerance, has been disastrous.

The problem is not limited to any specific ethnic or religious origin. The inverse relationship between prices of oil and democratic institutions or cultural freedom maybe witnessed even in Latin America.

With 6% of the world's proven oil reserves, Venezuela is not a Muslim country. But, instead of achieving progress with the higher value of its exported natural resources, Venezuela has become a pathetic example of political arrogance, authoritarian populism and institutional decadence.