The oil industry is facing uncertainty and significant unknowns with oil prices fluctuating sharply. This makes it difficult for economic experts and analysts to come up with solid analyses and forecasts, due to political events and security tension surrounding the Arabian Gulf — the world’s largest black gold mine. No doubt that opinions and analyses are affected significantly by the on-going political and security events in the region and the entire world.
The effects of oil prices are crucial to the GCC economies, a fact that can be easily noticed through a review of economic indicators of GCC countries. Through a quick review, there are huge gaps in GCC’s economic indicators of growth, the size of GDP and surplus balance of trade, and other important indicators, within short periods of time relatively.
Previously, oil producers and exporters in the world rejoice with any rise in oil prices, but the skyrocketing prices have created a state of confusion in oil exporting countries, which were surprised by record oil revenues, which have accumulated without appropriate investment channels to invest these revenues.
For instance, the late Libyan leader Muammar Gaddafi, prior to his death, made a decision to distribute a portion of oil revenues to Libyans. However, he did not fulfil his promise. Yet, despite this foolish decision, it reflects the underestimation of unrepeated historical opportunities provided by oil resources for the development of Libya.
Moderate countries have felt the gravity of exaggerating oil prices and their negative effects on the global economy, especially in view of the financial crisis that hit world economies, including countries with major oil-consuming countries, where these reflections include oil-exporting countries themselves.
The problem is that at a time when oil revenues have doubled, inflation rates have doubled too, and eventually oil prices have increased without objective reasons, and exceeded increases in international commodity markets. Hence, salary increases in most oil countries failed to bridge the gap between wage increase and soaring living costs resulting from inflation, especially in view of the absence of control on the prices of goods and services.
This has created a sort of price chaos, which has negatively affected living standards, thus making many essential goods and services, including housing, out of reach for large social groups. While certain types of goods and services such as health services, they moved to less cost markets, due to astronomical rise in their costs in oil countries.
This has prompted many oil-producing countries, including the GCC countries, to attempt to control rising prices and keep them at fair levels that help for the recovery of the global economy, which is affected by the crisis on the one hand.
On the other hand, these countries are trying to ensure the stability of their economic conditions, meet requirements for development and the gradual approaches aimed at developing alternative sources of oil, which have become economically feasible after oil prices increased several times, and further exceeded the barrier $ 140 per barrel in some times.
The price of a barrel of oil, which ranges between $ 90-100 is fair at present, as it is compatible with international economic conditions and allows for the possibility of recovery again. This also meets requirements for development in oil-exporting countries and puts many negative indicators, such as the excessive inflation, under control.
The problem is that there are some Opec countries seeking to raise oil prices to hit new highs — as high as around $200 per barrel, which would pose a disastrous threat to the global economy in light of the current crises. These countries, which seek to increase oil prices, are suffering from economic difficulties and trying to solve them by increasing oil revenues.
In fact, finding solutions to these difficulties does not rely on oil revenues alone, but is linked to overall economic policies in any country. For example, militarisation of the community, allocation of significant incomes for non-productive sectors and increasing foreign obligations can swallow up a large portion of any country’s returns.
In all cases, oil prices are no longer defined by oil exporting countries alone, but also by consuming countries, which are trying to find some kind of stability in global oil markets, and thus they agree with most of major exporting countries, ushering in more stability in the economies of the two groups and the global economy as a whole.
