Oil experts urge economic diversification
DOHA: Oil experts and economists opined yesterday that diversified economies are the optimal way to offset the current dip in international oil prices, given that oil revenues of the OPEC’s Arab members make up 85-95 percent of their budgets.
Speaking at a one-day symposium focusing on the repercussions of the drop in oil prices on oil exporting countries, the experts sounded the alarm about the looming adverse impacts of low oil prices on oil exporting countries. But, they predicted that the factors of supply and demand would lead to a slow drop in oil prices by the end of this year, and prices would rebound by 2016.
Mamdouh Salama, an international oil expert, believed that the surge in oil prices over the last years made costly investment in unconventional oil production so economically feasible that unconventional oil production has been expanded in the US since 2012, but influence in oil prices began only in the second half of 2014.
This increase in shale oil production has resulted in unprecedented output levels in the US, hitting 8.5 million barrels of oil a day from six million barrels in 2012, he added. This synchronized with growing conventional and uncongenial oil output by OPEC members and Russia, and economic slowdown in several countries, mainly China, Salama noted.
Qatar’s ex-oil minister Abdullah bin Hamad Al-Attiyah, said it was unfair to repeatedly urge the OPEC to cut its production while non-OPEC members exerted no effort to maintain acceptable oil price levels. Attiyah, who chaired the OPEC for several terms of office, dismissed allegations that the OPEC’s decision to maintain output levels unchanged was part of a US-Saudi plan to rein in the financial and economic capabilities of Russia and Iran.
Khaled Al-Khater, a financial expert, suggested should high supply and low demand continue, then oil prices would not rebound in the near future. The continuation of high supply is contingent upon two factors: output reduction and the ability of unconventional oil to absorb oil fall and expanded production, he pointed out. Meanwhile, Amer Al-Tamimi, an economist, estimated that Kuwaiti oil revenues for this year couldn’t exceed KD 14 billion, which indicates a possible annual budget deficit worth KD 6 billion unless retrenchment measures are adopted. He called on Kuwaiti and Gulf governments to cut their capital and current spending and to reconsider their policies of subsidy which amounts to KD 6 billion in Kuwait annually.