How drop in oil price will affect Arab Spring countries
Stable Arab Spring countries are likely to benefit from declining oil prices
Stable Arab Spring countries that are short of energy resources could see economic boost from the declining oil prices, experts say.
Oil prices fell at a pace unseen since the 2008 international financial crisis with Brent crude falling below $86 per barrel on Tuesday, driven by slow demand and ample supply.
Namat Abu al-Soof, energy consultant at OPEC’s Fund for International Development, said the drop of oil price is likely to benefit Egypt, the largest oil and natural gas consumer in Africa.
Egypt reportedly consumed "more than 20% of total oil consumption and more than 40% of total dry natural gas consumption in Africa in 2013." The government in 2012 spent $26 billion in energy subsidies, leading to a high budget deficit, according to The U.S. Energy Information Administration (EIA).
“Despite that Egypt produces oil, we cannot consider it to be an oil-exporting country…I think the drop in prices came to its benefits, and this applies to other European countries, Japan and other importing countries,” Dr. Abu al-Soof told Al Arabiya News.
Abdul Samea Bahbani, CEO at Kuwait-based Sharq Petroleum Consultancies, said low oil prices “will allow poor countries to revive themselves through bridging their deficits.
Morocco, a net hydrocarbon importer, and Tunisia, which has witnessed rising energy imports in recent years, are likely to benefit from the falling price of oil, albeit temporarily.
Mohamed al-Mady, chief executive of Saudi Arabia’s Basic Industries Corp (SABIC), said the decline may last for a year or so, but will likely pick up again within a year.
In the same vein, Saudi Shura Council member and former Aramco consultant Thuraya al-Arrayed sys: “Everyone is mostly looking at the situation as a temporary one.”
But some top oil producers in the Arab world have expressed concern that declines in the oil price could damage their economies.
Kuwait's ruler on Tuesday urged lawmakers to "stop squandering resources" and to diversify revenues.
“We are seeing a new cycle of low oil prices as a result of political and economic factors shaking the global economy and starting to negatively impact our national economy,” Sheikh Sabah al-Ahmad al-Sabah said in a speech to open the new parliamentary term.
The International Monetary Fund had set a “breakeven price” for Saudi Arabia at $86 per barrel, followed by the UAE at $74, Qatar at $71, while Kuwait had the lowest break-even price at 53 per barrel.
Mohammad al-Shatti, an oil expert from Kuwait, said there was not much to be concerned about at the present time because prices are still around these levels, adding that OPEC’s meeting is just around the corner.
Shatti said OPEC members could agree to lower production and stabilize prices, but it would be difficult for the organization to force some member states, like Iraq, Libya and Nigeria to cut, production.
Dr. Fahad bin Jumaa, a Saudi economist and oil expert, said: “96 percent of OPEC countries do not commit to their quotas,” Jumaa told Al Arabiya News.
Abundant oil supply is therefore expected to continue against lackluster demand in the market. This prompted Goldman Sachs on Monday to slash oil forecasts $70 a barrel by the second quarter of 2015.
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