How low crude oil price is chok­ing the econ­omy!

The Kurdish Globe - - NEWS - By Swara Kadir

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.

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