How low crude oil price is choking the economy!
What impact does the drop in crude oil price have on the world economy in general and the Kurdistan market in particular? Who is going to be hit the hardest and the softest? What can Kurdistan do to avoid the crude oil price fluctuations trap?
As the price of crude oil reaches its lowest point of around $80 dollars per barrel, overall countries that are intensive oil consumers like China, and North America are benefiting from the reduced oil and fuel prices. Whereas, big oil producers that are heavily dependent on oil revenues are making big losses. Kurdistan at a most unfortunate time of just starting out as an oil producer is hit hard by this global trend.
Wise countries that have back up plans are able to cushion the price drop; examples are Kuwait and Saudi Arabia. Kuwait has been cutting back its national expenditures and forcing austerity measures, Saudi Arabia has huge monetary reserves that it’s able to draw from at such times. Kurdistan doesn’t have a plan B right now to weather the price blow. What can it do?
Crude oil price fluctuations are inevitable. What gives Kurdistan an edge over countries like Kuwait and Saudi Arabia is its alternative natural resources that can compensate for oil. These are agriculture and tourism. Admittedly, due to the political situation tourism is taking a dive, but agriculture is certainly a sector that is worth investing it. It can serve as the economic plan B for Kurdistan whenever oil proves an unreliable source of income.
Maybe such shifts in economic production might take a long time to apply. The good news is OPEC is meeting towards the end of this month to cut back its supply in order to raise prices, which ought to act like an economic band aid until some long term economic solution is applied.