Monday, February 25, 2008

Oil Opulence Oh Oh

From the Columbia Journalism Review's Opening Bell blog, er, column:

The New York Times leads its front page with an interesting report that inflation is causing (um, more) turmoil in the Middle East. We’ve read all the stories about how our gas money is paying for a new wave of opulence in the region—as well as the purchasing of big stakes of our Wall Street titans—the Times says the downside is considerable.

Oil price increases have hurt the poor and middle class. Jordan eliminated its gas-price subsidies this month, sending the cost of fuel—along with staples like eggs and potatoes—up nearly double or more.
Many of the region’s economies peg their currencies to the dollar, which has tumbled, spurring inflation for economies that depend on imports for much of their good and services.

In Bahrain and the United Arab Emirates, inflation is in the double digits, and foreign workers, who constitute a vast majority of the work force, have gone on strike in recent months because of the declining purchasing power of the money they send home. The workers are paid in currencies that are pegged to the dollar, and the value of their salaries—translated into Indian rupees and other currencies&mdsah;has dropped significantly.

The Times says rich countries are making up for the increased inflation by jacking up salaries—which in turn worsens the inflation. The United Arab Emirates gave its government workers 70 percent raises this month, while Omanis had to settle for 43 percent. Poor, Omanis!

All this is causing some messy social consequences. Yemen, Morocco, and Lebanon have seen riots over food prices, while Jordan has seen demonstrations....