Oil Shortage Creates New Problems for Yemen

I first encountered the nascent fuel shortage afflicting Yemen in March, during my last week living in the country. The first sign came when I found my daily lunch restaurant suddenly closed because they ran out of cooking gas. Then, on my final night in Sana’a, I noticed a strange crowd gathering around a pickup truck down the street from where I lived. Locals were buying canisters of gas from a man standing in the truck bed. Cooking gas had never been sold at night, and its sale never drew an instant crowd like this one.

The fuel crisis in Yemen began in March when a tribe attacked the pipeline connecting the country’s oil fields in Marib to the Red Sea coast. Most of the oil that travels through the pipeline is destined for international markets, while some is kept for refineries in Yemen. Now, four months later, the fuel shortage has gravely worsened. Lines to purchase gas from filling stations at the government-subsidized price have at times stretched for miles and waits can last for days. Of course, fuel can be found on the black market, if one can afford paying over 6.5 times the legal price.

The shortage impacts more than the cost of transportation. Farmers can’t irrigate crops because diesel is needed to power the water pumps on wells. Backup generators can’t run during the capital’s day-long power outages. Trucks can’t transport water and food for lack of gas.

Saba, the state news agency, reported two weeks ago that the Marib pipeline had been repaired, but that it will take time to return to earlier levels of production. The same report announced a three-million-barrel donation of oil from the United Arab Emirates, adding to a similar donation by Saudi Arabia in June meant to help alleviate the shortage in the immediate future.

Unfortunately for the people of Yemen, fuel shortages will not be a short-term problem. The current crisis could be a glimpse into Yemen’s future. The World Bank predicts that Yemen’s oil fields could stop producing revenue as early as 2017. Meanwhile, oil revenue accounts for over 70% of the government’s income. 

The loss of this income at the state level will be devastating for the average Yemeni. Some 30% of government expenditures go toward domestic fuel subsidies, while electricity and water are further subsidized to 20% and 30% of market cost respectively. Perhaps the most relevant government expenditure to the current political crisis is the cash needed for the elaborate patronage networks upon which Yemeni President Ali Abdullah Saleh built his regime.

The fuel crisis will fundamentally alter the way that Yemen’s government and economy function. The vast majority of government revenue is disappearing along with the oil. Although Yemen possesses sizeable stores of natural gas, these are not expected to come close to replacing the income generated from oil. The present political crisis cannot be solved simply by accountable leadership; the very operation of government must be completely restructured.

Barring the sudden discovery of a new source of state wealth to maintain staple subsidies, the economy will be forced to liberalize. This is a painful process for any country accustomed to subsidized necessities, but the effects could be especially acute for Yemen, the poorest country in the Arab world. These are the big-picture structural challenges facing whoever assumes leadership in Yemen after this Arab Spring, lest Al-Qaeda, the northern rebellion, secession movements, overdrawn water reserves, high unemployment, and an exploding population not be considered challenge enough.

The restaurant closures and late-night fuel deliveries I witnessed are minor inconveniences next to the escalated effects of the prolonged oil shortage. Given the far-reaching impact of declining oil revenues on the life of the average Yemeni, let us hope this new low in quality of life is not the new norm.

Photo Credit: Wikimedia Commons

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Paul Leuck

Paul is a Master's degree candidate at the Johns Hopkins School of Advanced International Studies where he specializes in international economics and Middle East studies. He previously worked as a language school administrator in Yemen and has also evaluated USAID international development programs in Yemen, Russia, and multiple sub-Saharan African countries. Other interests include cheesecake, Notre Dame football, and throwing shade at overblown internet outrage.

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