Oil prices have of late witnessed a quick and unexpected recovery to $50 (Dh183.50) a barrel. This recovery was associated with fluctuations that resulted from either speculations or from geopolitical and technical developments, such as the strikes and acts of sabotage targeting Nigerian oil installations and the unstable situations in Iraq and Iran, or even the decline in US inventories and drilling rigs.
The oil price gain has occurred in spite of doubling of Iranian oil exports by 2.5 million barrels a day and the boost to Iraqi production by more than 4 million barrels a day. Meanwhile, global demand has also increased, especially in Asia where the Chinese economy is growing faster than expected, creating a state of fragile balance that has, despite fluctuations, raised prices.
It is true the that prices might continue to fluctuate over the coming months, but they should remain in the current range with some drops and rises depending on market conditions and the whims of speculators.
What does that mean? In short, that means dampening the misleading analysis that expected the collapse of the Gulf economies, in part generated by ridiculous Iranian propaganda.
Given the incidence of poverty and miserable economic conditions it experiences, Iran is singularly unsuited to anticipate the collapse of stable economies brought on by sharp declines in oil prices. Despite the oil price situation, GCC economies provide its citizens and expats alike for stable lives.
Price fluctuations
The expectations of those who wish ill-will have been dashed simply because current oil prices can provide basic revenues through which oil producing countries can cope with and overcome any economic difficulties that might result from price fluctuations.
In fact, this is what has been referred to by the Russian minister of energy who said his country can adapt to the existing oil prices. The Qatari minister echoed similar remakes last week, saying that the current price is convenient to his country and the same applies to other GCC states, which besides enjoying sizeable cash reserves have already conducted radical and significant financial reforms that would contribute to enhancing their economic activity.
It is true that some countries in the region have indeed issued bonds to either implement vital projects or cover their annual budget deficits. But this measure is considered a financial one and is being taken by most countries, including economically advanced ones. This does not necessarily reflect the existence of structural economic difficulties, as it is being used by countries with budget surpluses for various reasons.
Meaningful measures
The Gulf states have successfully passed a testing phase without the need to take any further measures, dealing a strong blow to all regional and international powers who placed bets on an unravelling of the GCC’s economic future.
In addition, there are so many meaningful measures that can help improve the financial conditions, but there is no need for them right now.
Many a times in local and international media outlets — especially at the beginning of the oil price crisis — there was some hyperbole on the measures taken. The GCC states have coped with a vicious smear campaign that attempted to undermine and destroy their achievements.
We have submitted an objective analysis based on data reflecting the actual situation in the Gulf and their unique ability to overcome the oil price slump.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.
