Current Oil Boom May Be The Last For Arab States: CNN
The oil boom brought about by the Ukraine war has made energy-rich Middle Eastern countries extraordinarily wealthy once again. But experts warn that it may be the last such upswing.
Photo Insert: Middle Eastern energy exporters are expected to reap $1.3 trillion in hydrocarbon revenues over four years as a consequence of the current boom.
The energy price spike triggered by the war lifted the Gulf states out of an almost decade-long economic slump that saw them cut spending and go into budget deficits as their economies shrank. Russia's invasion of its neighbor shot the value of crude to an eight-year high, Nadeen Ibrahim reported for CNN.
Gulf states went through oil booms in the 1970s and 1980s, and then another in the early 2000s. But changing attitudes toward energy consumption mean that such cycles may no longer be tenable, and Gulf states need to be prepared for it, experts say.
"This is certainly the beginning of the end of oil wealth at this sustained level," said Karen Young, senior research scholar at Columbia's Center on Global Energy Policy. Western states have been working towards renewable energy transitions, which today seem more pressing than ever as the Ukraine war drastically disrupts Europe's key supply channels for oil and natural gas.
"Today's boom is different in that it is more than an oil crisis," said Young. "It is a major shift in the structure of how we meet global energy needs."
Middle Eastern energy exporters are expected to reap $1.3 trillion in hydrocarbon revenues over four years as a consequence of the current boom, the International Monetary Fund (IMF) has said.
Experts have warned them against wasting it, arguing that Gulf states need to shield themselves from fluctuations in oil prices by using the windfall to diversify their economies away from their dependence on oil riches.
During previous oil booms, Gulf states were seen as squandering their wealth on wasteful and inefficient investments, building sprees and buying weapons, as well as handouts to citizens. Those booms were followed by downturns when oil prices cooled as the nations continued to rely on hydrocarbons for their revenues.
“Oftentimes building projects are started and then abandoned when the oil money runs out," said Ellen Wald, a nonresident senior fellow at the Atlantic Council in Washington, D.C.
"Because they have so much to spend there often isn't much oversight and there has traditionally been a lot of corruption."
According to Omar Al-Ubaydli, director of research at the Bahrain-based Derasat think tank, there has also traditionally been a heavy emphasis on increases in public sector hiring and in public sector salaries through bonuses or raises.
A May 2022 report by the World Bank stressed that the wealth obtained by Gulf countries post-pandemic and after the Ukraine war must be invested in the bloc's "economic and environment transition."
The focus on investing in the energy transition is crucial as many parts of the world hasten their renewable energy transition, said the report.