Why we should expect yet more chaos in global oil markets |
For the uninitiated, Dubai, the second city of the UAE after Abu Dhabi, can be both fascinating and grotesque. It is fascinating in the sense that it should not be there, surging out of the sand in one of the most inhospitably hot places on Earth. Only the madness of human ambition would have thought of building such a throbbing city of immigrants where no humans had ever lived in anything but sparse nomadic numbers.
It is grotesque in the way it is a structured hierarchy divided on ethnic grounds. On the top are the fantastically wealthy Emeriti minority. In the middle you have mainly white European professional immigrants, and on the bottom a huge Asian workforce who toil away in the baking heat, building the next new suburb of the mega-city. For all that, the place is a 21st century Gotham, packed with millions of people striving to better themselves, bringing their talents to a multicultural entrepot. Meanwhile, the government, with a nod to Islam, lays down a few ground rules, but generally looks the other way.
In terms of relationships within the UAE, if Dubai is the mistress, Abu Dhabi is the sugar daddy. An hour or so up the road lies the more austere, religious and wealthy city, which tolerates the wayward, partying Dubai and regularly bails the latter out when it suffers the perennial banking and real estate busts that are part and parcel of being a booming frontier city. Not long after the last crash, I spent some time working with the National Bank of Abu Dhabi, and the recurring chat was about how much Dubai might need this time. Among other things, that bank invested a small part of the huge oil surplus that being Opec’s [Organization of the Petroleum Exporting Countries’] third-largest producer generated.
The UAE joined Opec in 1967. Prior to Opec,........