Oil ex­perts urge eco­nomic di­ver­si­fi­ca­tion

Kuwait Times - - LOCAL -

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.

Un­fair

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.

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