Why the current oil boom of Arab countries may be the last

The Gulf states went through oil booms in the 1970s and 1980s, and then another boom in the early 2000s. But experts say changing attitudes toward energy consumption means that such cycles may no longer be sustainable, and the Gulf states must be prepared.

“This is certainly the beginning of the end for oil wealth at this sustainable level,” said Karen Young, a senior fellow at the Middle East Institute in Washington.

“Today’s boom is different in that it is more than just an oil crisis,” Young said. “It’s a major shift in the structure of how we meet global energy needs.”

The International Monetary Fund said that energy exporters in the Middle East expect to reap $1.3 trillion in hydrocarbon revenues over four years as a result of the current boom. Experts warned them not to waste it, arguing that Gulf countries need to protect themselves from oil price fluctuations by exploiting windfall profits to diversify their economies away from their dependence on oil wealth.
During previous oil booms, the Gulf states were seen as squandering their fortunes on wasteful and inefficient investments, building a spree and buying weapons, as well as providing aid to citizens. Those booms were followed by recessions when oil prices fell as countries continued to rely on hydrocarbons for their revenues.

“Construction projects are often started and then abandoned when the oil money runs out,” said Eileen Wald, a non-resident fellow at the Atlantic Council in Washington, D.C. “Because they have a lot to spend there often not a lot of oversight and there has traditionally been a lot of corruption.”

According to Omar Al-Obaidli, director of research at the Bahrain-based Derasat Research Centre, there has also traditionally been a heavy focus on increases in public sector employment and in public sector salaries through bonuses or raises.

A May 2022 World Bank report stressed that the wealth acquired by the Gulf states after the pandemic and after the Ukraine war should be invested in the bloc’s “economic and environmental transformation”.

The report said that focusing on investment in the energy transition is critical as many parts of the world are accelerating the transition to renewable energy.

The Gulf states seem to be diversifying. Since the last oil boom that ended in 2014, four of the six Gulf states have introduced a value-added tax, and the UAE has gone even further by introducing a corporate income tax. There is no income tax in any of the Gulf countries. Saudi Arabia is investing in non-oil sectors such as tourism, but experts have questioned the sector’s ability to offset oil revenues. The Kingdom earns nearly one billion dollars a day from oil at current prices.

Gulf states have backed away from the idea that hydrocarbons could be phased out as a primary source of energy as environmentally conscious nations moved to alternative sources. They say that oil plays a crucial role in the global economy and will continue to do so.

Critics object that it is in the interest of oil exporters to push this narrative, but oil nations have pointed to rising demand for crude that has coincided with the removal of Covid-19 restrictions around the world.

The Paris-based International Energy Agency said last week that oil demand is set to grow sharply next year, driven by the resumption of work in China and global travel.

The United Arab Emirates, one of the world’s largest oil exporters, has warned that a very rapid transition away from hydrocarbons could cause an economic crisis.

“Policies aimed at divesting from hydrocarbons too soon, without suitable viable alternatives, are self-destructive,” Sultan Al Jaber, the UAE’s special envoy for climate change, wrote in an opinion piece in August. “They will undermine energy security, undermine economic stability, and leave less income to invest in the energy transition,” he added.

Young of the Middle East Institute said that even if economies move away from oil as an energy source, oil-based products such as petrochemicals and plastics will continue to be in demand.

However, experts say the Gulf states realize that even as demand for oil continues, such price hikes may not occur again with the same degree or frequency.

“There is a tangible feeling that this is a fleeting boom and that it may represent the last sustained rise in oil prices,” Al-Obaidli said. “Governments and people alike feel that this is an opportunity that should be fully exploited, rather than squandered by short-sighted decision-making.”

digestion

An Iranian woman dies after falling into a coma while in the custody of the morality police

Iran’s semi-official Etimad Online, citing her uncle, reported that a 22-year-old Iranian woman died after she was arrested by Iran’s morality police earlier this week. The killing of the woman sparked outrage across social media platforms, prompting reactions from local and Western officials.
  • background: On Tuesday evening, Mahsa Amini and her family, who had traveled from Iran’s Kurdistan Region to visit relatives in the capital, Tehran, were stopped by a patrol of the Morality Police – a unit that enforces strict dress codes for women. According to IranWire, human rights activists who spoke to the family said that police arrested Amini and forced her into a police car. On Thursday, Tehran police said Amini had suffered a “heart attack”. Iranian officials said, on Saturday, that an autopsy had been carried out, and the results would be announced after an examination by experts.
  • why does it matter: The incident sparked global outrage, with many using the hashtag #MahsaAmini in English and Farsi on social media to protest Iran’s morality police and the assault women face in relation to the country’s strict hijab rules. It also comes on the heels of recent protests on social media in Tehran against the “National Hijab and Chastity Day”.

Erdogan wants Turkey to join the Shanghai Cooperation Organization

President Recep Tayyip Erdogan has said he is targeting membership in the Shanghai Cooperation Organization (SCO) for NATO member Turkey, Reuters reported, citing Turkish broadcaster NTV and other media on Saturday. He was speaking to reporters after attending the Shanghai Cooperation Organization summit in Uzbekistan. “Our relations with these countries will move to a much different position with this step,” Erdogan said. When asked if he intended membership in the Shanghai Cooperation Organization, he said, “Of course, that is the goal.”

  • backgroundTurkey is currently a dialogue partner of the Shanghai Cooperation Organization, an economic, political and security group whose members include China, Russia, India, Pakistan, Iran, Kyrgyzstan, Tajikistan, Kazakhstan and Uzbekistan.
  • why does it matter: Joining the Shanghai Cooperation Organization will bring Ankara closer to Russia and China as the Ukraine war polarizes global politics. NATO member Turkey maintained good relations with Russia during the war and refrained from joining its Western allies in punishing the country.

Photos show the Iranian leader at an event amid reports of deteriorating health

Pictures and a video posted on Iranian government websites and state media showed the country’s Supreme Leader Ayatollah Seyyed Ali Khamenei sitting in a mosque in Tehran to attend the Arbaeen mourning ceremony, at the end of a 40-day period of mourning for the killing of one of the prophets. Muhammad’s grandsons, a day after news came of the ayatollah’s health deteriorating.

  • background: The New York Times reported on Friday that Khamenei canceled all public appearances last week after he fell “seriously ill” and was under the watch of a team of doctors. Citing four unidentified people familiar with his health, the New York Times said Khamenei was resting in bed after undergoing surgery sometime last week for a bowel obstruction.
  • why does it matterKhamenei has been Iran’s leader for the past three decades and is one of the longest serving rulers in the Middle East. It remains unclear who might succeed the leader, but in the event of his death it is expected that the Assembly of Experts will meet to discuss his successor.

what do you want to watch

Queen Rania of Jordan talks to CNN’s Becky Anderson about advice given to her by the late British Queen Elizabeth II, saying she stays with her to this day.

Watch the interview here:

About the area

Moroccans Ines Laclaleche breaks off the seventh hole during the first day of the Aramco Team London series on June 16, 2022 in St Albans, England.
Novice professional golfer Ines Laclaleche became the first Arab and first North African woman to win the Women’s European Championship when she won the Lacoste Women’s Open in France on Saturday.

The 24-year-old Casablanca-born defeated English golfer Megan McClaren in a playoff on Saturday, and said her victory at the French Open Women’s Championship would be something she will remember “for the rest of my life” as she celebrated her historic victory. In Deauville next to her husband Ali, who also works in cans.

“It feels great,” said Laclaleche’s women’s website. “It’s great to hear that. I don’t have any words to describe it.”

She added that “Morocco is doing a great job in promoting golf” and that “a Moroccan victory in a grand tour would be a huge thing for the country and the Arab world in general.”

Laclaleche also said she is a huge fan of Tunisian tennis star Anas Jabeur, who became the first African woman to play in a Grand Slam final when she reached Wimbledon and the US Open this year.

Written by Amy Lewis

today’s picture

Environmental volunteers build a pyramid made of plastic waste collected from the Nile, as part of an event to raise awareness of pollution in '  world cleaning day & quot;  In the Misr district of Giza near the capital Cairo, on Saturday.

Related Posts

Leave a Reply

Your email address will not be published.