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Global oil prices have fallen sharply over the past ten months, leading to significant revenue shortfalls in many Arab nations especially GCC countries . Analysts say the drop has been driven by oversupply, coupled with a fall in demand because of a slowdown in economic growth in China and Europe. The effects of falling prices are being felt by economies around the world. But oil producing nations that rely on exports have been particularly hard hit, with many now feeling the social and, in some cases, political impact (money.cnn.com).
Do you think drop in oil prices would contribute to low employment rate in Arab countries?
Are things will get worse for economy of Arab nations especially GCC ( Saudi Arabia, Kuwait, UAE , Qatar, Bahrain, Oman) ?
Low global oil prices do indeed have certain positive effects, but which industries are the main beneficiaries?
Not even the mighty Middle East can survive cheap oil forever. If oil stays around $- a barrel, most countries in the Gulf region will run out of cash in five years or less (International Monetary Fund IMF Report ). That includes OPEC leader Saudi Arabia as well as Oman and Bahrain. Gulf countries as major oil exporters will need to adjust their spending on oil sector and revenue policies to ensure fiscal sustainability that will lead to a massive cycle of employees layoffs and definitely would impact unemployment rate due to turbulence in financial markets.
Saudi Arabia, the world's largest oil producer, would be the biggest loser That's why Saudi Arabia is moving fast to preserve cash. After years of huge surpluses, Saudi Arabia's current account deficit is projected to soar to% of gross domestic product.
However, UAE, Kuwait and Qatar can survive decades . A handful of countries are well positioned to face the storm. Topping that list are Kuwait, Qatar and the United Arab Emirates. That's partially because these countries don't need sky-high oil prices to balance their budgets because these three countries have built up mountains of oil money that protect them during the leaner times.
While there may be a few casualties from the falling oil prices there also winners on both a global and local level. The most obvious beneficiaries locally could be the airlines, with lower oil prices proving a boost to the profitability of both Emirates and Etihad. This windfall could be invested in more competitive hotel and stop over packages within the UAE, thereby offsetting some of the losses that hotels and retail operators may experience due to declining tourist numbers from non-dollar dominated source markets.
Do you think drop in oil prices would contribute to low employment rate in Arab countries? - Drop in an employment rate has been felt since mid 2015 due to decreasing oil price. However, some Arab countries like UAE was able to rise up from this setback with the fast-growing tourism and infrastructure demand for the upcoming Expo 2020.
Are things will get worse for economy of Arab nations especially GCC ( Saudi Arabia, Kuwait, UAE , Qatar, Bahrain, Oman) ? - In my humble opinion, there is less chance for UAE to have worse economy since it doesn't solely rely on oil revenues. UAE's GDP is divided from different sectors especially tourism.
Low global oil prices do indeed have certain positive effects, but which industries are the main beneficiaries? - Like what Ms. Ghada said, it's affirmative that Airline industry and tourism would benefit from this low oil price. As an additional, automobile industry would definitely be one of the beneficiaries too since people can afford to allot budget to fuel expenses as compared to previous years. And if fuel is cheap, it is also followed by lower transportation cost.
Saudi Arabia, the world's largest oil exporter and Opec's most influential member, could support global oil prices by cutting back its own production, but there is little sign it wants to do this.
There could be two reasons - to try to instil some discipline among fellow Opec oil producers, and perhaps to put the US's burgeoning shale oil and gas industry under pressure.
Although Saudi Arabia needs oil prices to be around $85 in the longer term, it has deep pockets with a reserve fund of some $700bn - so can withstand lower prices for some time.
"In terms of production and pricing of oil by Middle East producers, they are beginning to recognise the challenge of US production," says Robin Mills, Manaar Energy's head of consulting.
If a period of lower prices were to force some higher cost producers to shut down, then Riyadh might hope to pick up market share in the longer run.
However, there is also recent history behind Riyadh's unwillingness to cut production. In the 1980s the country did cut production significantly in a bid to boost prices, but it had little effect and it also badly affected the Saudi economy.
A part of the oil production is used for Captive Consumption and the rest for Exports. The % used for captive consumption the adverse impact is balanced through the benefit derived by other sector beneficiaries. The exports need to be priced at the current market level and thus margins are thinned and that has to be compensated through various kinds of price cuts and overheads. Naturally the producer's economy may face challenge to tide over the situation.
In my opinion, the Temporary winners are (a major chunk) the real looser as they have to face other economic consequences like return back of the migrated population with unemployment or underemployment problem that result in adverse balance of payment on the one side as a result of reduction of Export of Services. India could be such a looser as the temporary benefits of oil imports are required to be nullified due to reduction in employment opportunities abroad.
Experts answers are worth reading for their summing up with explanations.
Winners are importers of oil for various purposes (manufacturing etc)
Losers are countries that did not diversify and relied solely on oil to generate revenue.
Thank you for the invitation, I think the winners are the importers and companies that distributing petroleum products and non-oil-producing countries with weak and fragile economies, while the losers understand the producers of Petroleum what did not take precautionary measures not to rely entirely on the export of oil and enter into export other alternatives
I think that the biggest losers are the countries with a high volume of production and export and painted their budgets on the basis of the price of oil before the drop, which used its citizens a certain level of income will not accept less than or at least they will face difficulty with governments that will reduce support and spending to the face of declining prices, feel citizens upset and discomfort
As for the big winner are the countries that produce oil but provides its stocks and imports oil at a lower price, as well as of the parties Winners some countries that have political ambitions, as well as countries that do not produce oil but depend on it mainly for the purposes of industrial and consumables
This may be true may be wrong that's what I think
The fall of oil prices had a negative effect on the middle eastern and global economy. Many oil companies and oilfield services companies laid off many professionals starting late 2015. The training and consulting industry has also been affected by the drop of oil prices and the cutting budgets of the oil companies. My company for example has forced a 10% reduction on all salaries starting next month. If that's not a negative effect I don't know what would be. The picture is expected to keep getting gloomier though. Many economic experts say the downturn will reach a first peak by the end of this year close to the time of the elections in the USA. Then it will free fall from there for another year or so and then things will start to settle down as we reach the bottom of an upcoming economic depression over the next few years.
Is there a way out? Yes and No. Yes for us individually if we'd like to do something about it and move towards entrepreneurship and social business models to survive during those tough times. And No, we can't change the global storm coming, we just need to learn how to navigate through it.
Thank you for your answer FYI
Over the last several months of energy price declines that recently rattled stock markets and crippled drilling and production companies, cheap oil has been hailed by some as an effective economic stimulus and bemoaned by others as a significant growth handicap.
Just years back, oil prices exceeded $ per barrel and many analysts expected them to remain high for some time to come. That didn’t happen. Prices plunged, falling by more than percent in just six months ,the result of weaker-than-expected demand and ample supplies from both the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries. Supply growth was particularly strong in the U.S., with shale oil production booming in. Sinking prices have implications for economies across the globe. Important oil exporters, such as the OPEC countries, bear the brunt of negative impacts, while oil importers benefit. Overall economic activity in the U.S. will benefit, although lower oil prices will depress activity in many producing states, such as Texas and North Dakota. Why Oil Prices Plunged Opinions differ about the relative.
Now it is high time for OPEC countries to build a parallel economy as they cannot depend only on oil and energy wealth anymore.
loser offcourse all industry and manufacturing relation on oil field and they can transfer to Petrochemicals
maybe small effect in jobs in other industry but in oil they will faces a big challenge from budget and salary with revenue
