Gulf States Likely to Curtail Record Spending Programs in 2015
Gulf States losing about $1 billion dollars a day over the last 6 months due to decline in oil price
Top MENA Officials to Discuss Implications of Oil Market Turmoil on Tackling Middle East Youth Unemployment at Gulf Intelligence UAE Energy Forum on Jan 13 in Abu Dhabi
The Gulf States, which pump a quarter of the world’s daily oil supply, may see record government spending programs curtailed in 2015 budgets after a more-than 50-percent decline in crude prices may make it harder for countries to tackle critical issues such as youth unemployment and infrastructure investments.
According to a recent report from World Bank on the plunge in oil prices: “there have been a number of long- and short-term drivers behind the recent plunge in oil prices: several years of large upward surprises in oil supply; some downward surprises in demand; unwinding of some geopolitical risks that had threatened production; change in OPEC policy objectives; and appreciation of U.S. dollar. Supply related factors have clearly played a dominant role, with the new OPEC strategy aimed at market share triggering a further sharp decline since November. “
The International Monetary Fund has stated that if low oil prices persist and current fiscal policies continue unchanged, some Gulf oil exporting nations’ fiscal surpluses may turn into deficits as early as this year. In 2013, Saudi Arabia’s budget break-even oil price rose to $89 a barrel from $78 a barrel in 2012, according to the IMF. The kingdom’s finance minister, Ibrahim Alassaf, in late December said his ministry had assumed an average 2015 oil price close to levels of around $60 a barrel in its latest budget.
“The Gulf States have seen their oil revenue decline by about $1 billion dollars a day over the last 6 months and if that sustains through 2015 then we could see as much as $400 billion sucked out of the regional economy,” said Sean Evers, Managing Partner, Gulf Intelligence. “The lower-cost OPEC producers are hoping that the pain of declining prices will knock out higher-cost producers, including Canadian oil sands developers and shale producers in the U.S., sooner rather than later if prices remain at levels below $70 a barrel,” he said.
Upheaval in global oil markets and the wider implications on Middle East economies will feature as key topics at the sixth edition of the Gulf Intelligence UAE Energy Forum to be held in Abu Dhabi today. HE Fouad Siniora, the former Prime Minister of Lebanon, is set to give a keynote speech on the latest socioeconomic outlook for the region, which is faced already with one of the highest youth unemployment rates in the world at about 26% percent four years after the onset of the Arab Spring.
The Gulf Intelligence UAE Energy Forum will take place in Abu Dhabi on Jan. 13th, 2015, and featured guests include:
HE Suhail Mohammed Al Mazrouei, Minister of Energy, UAE
Fouad Siniora, Former Prime Minister, Lebanon
Dr. Aldo Flores-Quiroga, Secretary General, International Energy Forum (IEF)
RT Hon. Lord David Howell of Guildford, Former UK Secretary of State for Energy and Former Energy Adviser to the UK Foreign Secretary
Xiaojie Xu, Chair Fellow, IWEP World Energy & International Advisor to China’s National Energy Administration
Narendra Taneja, President, World Energy Policy Summit