Why Arab States’ Current Oil Boom Could Be Their Last

The Gulf States experienced oil booms in the 1970s and 1980s, then another in the early 2000s. But changing attitudes towards energy consumption mean that such cycles may no longer be sustainable and that Gulf states need to prepare for them, experts say.

“This is definitely the beginning of the end for oil wealth at this sustained level,” said Karen Young, senior fellow at Columbia’s Center on Global Energy Policy.

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

Middle Eastern energy exporters set to reap $1.3 trillion in hydrocarbon revenue over four years due to the current boom, the International Monetary Fund said. Experts have warned them against waste, arguing that Gulf states need to hedge against swings in oil prices by using the windfall to diversify their economies away from their reliance on oil wealth.
In previous oil booms, Gulf states were seen as wasting their wealth on wasteful and inefficient investments, building sprees and buying weapons, as well as gifts to citizens. These booms were followed by downturns as oil prices cooled as nations continued to depend on hydrocarbons for income.

“Often construction projects are started and then abandoned when the oil money runs out,” said Ellen Wald, nonresident senior fellow at the Atlantic Council in Washington, D.C. “Because they have so much to spend , there often isn’t a lot of oversight and there has traditionally been a lot of corruption.”

According to Omar Al-Ubaydli, research director at Bahrain-based think tank Derasat, there has also traditionally been a focus on increasing public sector hiring and public sector wages through bonuses or increases.

A World Bank May 2022 Report stressed that the wealth obtained by the Gulf countries after the pandemic and after the war in Ukraine must be invested in the “economic and environmental transition” of the bloc.

The focus on investing in the energy transition is crucial as many parts of the world are accelerating their transition to renewable energy, according to the report.

Four impacts of the war in Ukraine on the Middle East
The Gulf States seem to be working on diversification. Since the last oil boom which ended in 2014, four of the six Gulf States have introduced a value added tax and the United Arab Emirates has gone further by launching a levy on company profits. None of the Gulf States have income tax. Saudi Arabia has invested in non-oil sectors like tourism, but experts question the sector’s ability to offset oil revenues. The kingdom earns about a billion dollars a day from oil at current prices.

Gulf states have pushed back against the idea that hydrocarbons can be phased out as the main source of energy as environmentally conscious nations turn to alternative sources. Oil is and will continue to be crucial to the global economy, they say.

Critics counter that it is in the interest of oil exporters to push this narrative, but oil states have pointed to the surge in demand for crude that has coincided with the lifting of Covid-19 restrictions around the world.

The International Energy Agency based in Paris said last week that oil demand is expected to rise sharply next year, driven by a resumption of work in China and travel around the world.

The United Arab Emirates, one of the world’s biggest oil exporters, has warned that moving too quickly away from hydrocarbons could cause an economic crisis.

“Policies aimed at phasing out hydrocarbons too soon, without adequate viable alternatives, are doomed to failure,” wrote Sultan Al Jaber, the United Arab Emirates’ special envoy for climate change. in an August opinion piece. “They will undermine energy security, erode economic stability and leave less revenue available to invest in the energy transition,” he added.

Young of Columbia’s Center on Global Energy Policy said that even as economies move away from oil as an energy source, petroleum-based products like petrochemicals and materials for plastics will continue to be in demand.

Yet experts say the Gulf states are realizing that even if oil continues to be in demand, such spikes in its price may not recur to the same degree or with the same frequency.

“There is a tangible feeling that this is a transitory boom, and that it could represent the last sustained rise in oil prices,” Al-Ubaydli said. “Governments and citizens believe this is an opportunity that must be fully exploited, rather than wasted on myopic decision-making.”

The summary

Iranian woman dies after falling into coma while detained by vice squad

A A 22-year-old Iranian woman has died after she was arrested by Iranian morality police earlier this week, semi-official Iranian website Etemad Online reported, citing her uncle. The woman’s death sparked outrage on 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 arrested by a patrol of the vice police – a unit that enforces dress codes strict for women. According to IranWire, human rights activists who spoke to the family said police grabbed Amini and forced her into a police vehicle. On Thursday, Tehran police said Amini had suffered a “heart attack”. Iranian officials said on Saturday an autopsy had been performed and the results would be made public after expert review.
  • Why is this important: 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 assaults women face over the country’s strict morality rules. of hijab. This also follows recent social media protests in Tehran against the “National Hijab and Chastity Day”.

Erdogan wants Turkey to join Shanghai Cooperation Organization

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

  • Background: Turkey is currently a dialogue partner of the SCO, an economic, political and security grouping whose members are China, Russia, India, Pakistan, Iran, Kyrgyzstan, Tajikistan, Kazakhstan and Uzbekistan.
  • Why is this important: Joining the SCO would bring Ankara closer to Russia and China as the war in Ukraine polarizes world politics. Turkey, a NATO member, maintained good relations with Russia during the war and refrained from joining its Western allies in sanctioning the country.

Footage shows the Iranian leader at an event amid reports of his deteriorating health

Photos and video posted on Iranian government websites and state media showed the country’s Supreme Leader Ayatollah Seyyed Ali Khamenei seated in a mosque in Tehran, watching Arbaeen’s mourning ceremony , the end of a 40-day period to mourn the murder of one of the prophets. Mohammed’s grandsons a day after reports of the Ayatollah’s deteriorating health.

  • Background: The New York Times reported on Friday that Khamenei had canceled all public appearances last week after falling “seriously ill” and was under observation by a team of doctors. Citing four unnamed people familiar with his health, the NYT said Khamenei was resting after undergoing surgery last week for an intestinal obstruction.
  • why is it important: Khamenei has been the leader of Iran for three decades and is one of the oldest leaders in the Middle East. It is unclear who could succeed the leader, but it is expected that in the event of death, the Assembly of Experts will meet to discuss his successor.

What to watch

Queen Rania of Jordan speaks to CNN’s Becky Anderson about the advice given to her by Britain’s late Queen Elizabeth II, saying it sticks with her to this day.

Watch the interview here:

Around the region

Ines Laklalech of Morocco tees off on the 7th hole during day one of the Aramco Team Series London on June 16, 2022 in St Albans, England.
Beginner professional golfer Ines Laklalech became the first Arab and the first North African woman to win a Ladies European Tour title when she won the Lacoste Ladies Open de France tournament on Saturday.

The 24-year-old Casablanca native beat English golfer Meghan MacLaren in a play-off on Saturday, and said winning the French Ladies Open would be something she would remember “for the rest of my life”. , as she celebrated her historic victory. in Deauville alongside her husband, Ali, who is also her caddy.

“It’s amazing,” Laklalech said, according to the Ladies European Tour website. “It’s special to hear it. I have no words to describe it.”

She added that “Morocco is doing a great job in promoting golf” and that “having a winning Moroccan on a major circuit will be huge for the country and for the Arab world in general”.

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

By Aimee Lewis

Photo of the day

Environmental volunteers build a pyramid made of plastic waste collected from the Nile, as part of a pollution awareness event on the occasion of the "world cleanup day"  in the Egyptian region of Giza near the capital, Cairo, on Saturday.

This article has been updated to correct the designation of Karen Young.