There are indications of a compromise ahead of the OPECPlus meeting next month, as difficult discussions are taking place behind closed doors. A global agreement will be reached, given that there are a lot of oils on the markets and demand will remain strong. The stumbling block is the spread of the COVID-19 virus and its variants that simply won’t allow the global economy to open up any time soon. The number of COVID-19 cases almost worldwide is on the rise. In the United States, Europe and some Asian countries, the numbers are rising again, threatening the possibility of an economic recovery in the immediate future in industrial countries.
There is no doubt that oil prices will eventually rise. A level of $ 80 is not far off, with global demand rising, estimated at 99 million barrels and more next year. High oil prices are undoubtedly expected, but can oil producing countries do anything to build a stable economy by moving away from a single source of income just like us here in Kuwait ?! Certainly, the latest report on Kuwait’s financial rating by Standard & Poor (S&P) indicates that Kuwait has not developed a long-term strategy to organize its long-term debt, and its outlook in this regard is still negative, due to whose overall ratings were reduced to A +.
We have said over and over again that Kuwait must move away from oil and develop a long-term strategy to address its future scarcity and annual budget deficits. It has now been over six consecutive years and our spending is increasing every year. There are no solutions in sight or even being considered. Even though the price of oil has jumped again, giving hope for a reduction in our deficits, we don’t know if even $ 95 a barrel is enough to satisfy our continued appetite to increase our spending. At the same time, new graduates are knocking loudly on doors looking for work.
They are estimated between 25,000 and 30,000 per year, but no action has been taken in this regard, not even in a five-year plan. Improvements in oil prices are temporary situations. Our neighboring countries are taking positive steps to move away from oil and introduce local measures to reduce state deficits such as value added tax on goods except food products. For example, the choice is given to buy cheaper goods such as cars instead of going for very expensive cars. Smart consumers know they need to be careful and watch their spending. This will not be the last article that calls for the government’s attention to find a solution to our continued dependence on oil. He must face the reality of difficult times ahead if he fails to meet the need to find jobs for upcoming new graduates. Oil prices will continue to rise and fall, but will not stay at a level that will ensure a balanced budget! PS: “Kuwait in the Time of the British Empire” is the title of a recently published book written by young Kuwaiti citizen Muhsen Khajah who worked in Kuwait’s oil industry. It covers two periods – the era of the treaties between 1899 and 1961, and the oil era from 1913 to 1976, as well as the era of the nationalization of the oil industry in Kuwait. This book comes highly recommended for its straightforward formulations and an overview of practical petroleum experience. It also contains historical facts obtained from reliable Kuwaiti sources.
By Kamel Al-Harami Independent Petroleum Analyst
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