The Oil Paradox and Global Inequality

Since I will be taking a module on sociology of inequality this semester, I thought I’d write down some of my thoughts on inequality based on a limited knowledge of the recent oil crash after reading 2 articles from the straits times “A year to take advantage of cheap oil” and “Understanding the oil crash”.

On 7th January 2015, Brent crude oil yesterday fell below US$50 (S$67) a barrel for the first time since May 2009. I was rather perplexed by this phenomenon because the reactions seem rather mixed. I then realised that this was because the plunge of oil prices have different impacts on producers and consumers.

The plunge in oil prices is mainly caused by the shale revolution in America, which enables America to extract shale oil and gas which were untapped on previously. This has increased the supply of oil significantly. However, oil companies in Saudi Arabia do not wish to decrease their supply as they would want to drive out their American counterparts by lowering their profits further.

At the same time, the fall in oil prices is also worrying as it signifies that the demand for oil is low and that economic growth is slowing down. Developing countries such as China are not growing as much as they were.

For oil importers and consumers, especially developing countries such as China, a fall in oil prices indicate lower cost of production for industries, lower inflation and stimulate the economy.

On the other hand, for oil exporters and producers, especially countries such as Saudi Arabia and America, lower oil prices will indicate a fall in profits. In the past, a fall in oil prices might have been a good thing for industries in America, but the rapid growth of oil companies also mean that they make up a larger part of the economy and have a greater impact on the stocks in the market, thus leading to a plunge in stocks in America. (The plunge in stocks can also be attributed to other reasons such as a weakening Euro caused by political instability in Greece. This has raised fears and uncertainties about the eurozone and the global economy.)

This made me recall a statement my Integrated Humanities teacher made in class. He said, “When someone becomes richer, it must be that money is taken away someone else. When someone becomes poorer, it must be that money is taken away from him and given to someone else.” In that sense, the world economy acts like a zero sum game, whereby one person’s gain is equivalent to another person’s loss.

When I was young, I used to think that one will become richer by his own effort. If he is poor, he must get a job and work harder to earn more money. (I believe this is the effect of meritocracy in Singapore’s education.) It is only when I grew up and learnt more about economics that I realised that our personal wealth is not just controlled by our own efforts.

If any global phenomenon, such as the plunge in oil prices definitely mean that some countries will gain in some aspects, while others will lose, does that mean the global equality can never be reached?

Then, I started realising that perhaps, if we choose to define equality simply in the monetary sense, we have to accept that equality can never be achieved. Well, we even had different natural endowments in the first place. For example, Singapore didn’t have an abundance of natural resources, but we are well endowed with a strategic location and a relative lack of natural disasters.

However, if we redefine our definition of equality and broaden it to include other aspects such as a stable society, beautiful sceneries and a general satisfaction of life, it could be possible that different countries in the world is not unequal, but merely different.

Once, a friend of mine, embarked on trip to India for a mission trip. She returned sharing about how the people there are rather satisfied with their lives and even strive to share whatever they have in their house with their guests. They needed no sympathy, even though they are “poor”. This is because, they are only poor by our standards. This is typical of ethnocentrism, whereby people of a culture judge people of another culture by their own culture’s yardstick and standards.

A food for thought before I take my first lecture on sociology of inequality in school this week.

Sources:
1. A year to take advantage of cheap oil: http://www.straitstimes.com/news/opinion/more-opinion-stories/story/year-take-advantage-cheap-oil-20150106
2. Understanding the oil crash: http://www.straitstimes.com/news/opinion/more-opinion-stories/story/understanding-the-oil-crash-20141205
3. Alarm bells ring as oil dips below US$50: http://www.onenewspage.com/n/Asia-Pacific/754uw3q7n/Alarm-bells-ring-as-oil-dips-below-US.htm

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Author: Cheryl Tan

21 // +65 A closet thinker. Documents her life in words and songs. Hopelessly obsessed with skies, and oh, FOOD.

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