2016 Olympics Sabotaged by Qatar?
Doha, the capital city of Qatar, was eliminated from the running for the 2016 Olympics in June 2008. In June of 2008 Oil was running $151 / barrel and dropped to $46 over the next 7 months as production from other Opec members climbed. In October of 2009 Rio was selected for the site of the games. Oil prices were $78 per barrel and climbed as high as $119 in April of 2011. In August of 2014, about the time the bills for construction would be coming due, the price dropped again. Over the next seven months it slid to $49 / barrel. This slide meant that Brazil’s economy descended into recession. The Olympics are horribly expensive for any country to host. Because Brazil’s economy is so closely tied to the price of oil and gas, there wasn’t enough money to pay the bills.
National finance is a complex web of relationships but clear indications of national economic health can be seen in currency exchange rates. In July of 2008 the US Dollar was worth 1.5 Brazilian Reals. in April of 2011 the Real began to decline. By April of 2014 the rate was 2.2 to one. In simple terms, anything purchase with US Dollars doubled in cost. In January of this year it was nearly four Reals per US Dollar.
Could Qatar’s failure to gain the first Arab olympics have been enough motivation for Opec to increase production and crush Brazil’s economy? I think it may have been an unintended consequence that was welcomed by the royal family of Qatar.
When you look at the numbers it is interesting to note that the net result of falling prices verses income to the Arab countries was not that large. The price of a barrel of crude fell. The income per barrel fell, but increased production appears to have offset that in the Arab countries. Brazil is different because they could not easily match the production rates of the Arab members. Brazil was striving to build its internal ability to service its oil industry. Corruption in the programs to build the oil infrastructure that would have protected Brazil from large oil price fluctuations further crippled their economy. The Real fell against the Dollar and the result is algae in the pools.