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How to spend it
A region awash with oil money has one or two clouds on the horizon
The Economist
… Diabetes is a useful metaphor for the Gulf’s present problems. The region’s economies are struggling to absorb petrodollars, accumulating like glucose in the bloodstream. The risk they face is the economic equivalent of renal failure: inflation, a hollowing-out of the non-oil sector, and a young, growing workforce in chronic need of outside labour to supplement it.
The six nations of the GCC, which also includes Qatar and Oman, earned $381 billion from their exports of oil in 2007 and another $26 billion from gas, according to the Institute of International Finance (IIF).
… Inflation, which reached 8.7% in February, is a shock to the Saudis, whose central bankers are as conservative as their clerics. In Oman the rate is 11.1%, an 18-year record. In the UAE and Qatar it is also well into double digits.
Behind these disturbing numbers lie three economic forces. First is the rise in the world price of commodities, especially food, thanks to strong demand and strained supply. Second is the fall of the dollar, to which all Gulf currencies are pegged except the Kuwaiti dinar. The third force is less familiar. It is the rise in the price of non-traded goods, principally housing and office space, which is arguably a natural result of the oil boom, and may even help the Gulf absorb its new riches.
… The fall of the greenback, meanwhile, has raised the price of those imports not invoiced in dollars.
(24 April 2008)
Saudi Output Growth Can Help Forestall Peak Oil, Bernstein Says
Greg Walters, Bloomberg
Saudi Arabian oil output has the potential to rise, helping avoid a peak in world crude production, according to Sanford C. Bernstein & Co.
Oil prices may fall toward the end of this year as worsening economic conditions reduce demand, analysts Neil McMahon and Ben Dell forecast in a report today. Prices will probably rise later, beyond 2010, and reach $114 a barrel by 2015 as spare capacity declines, they wrote.
“Saudi and global oil production has the potential to grow slowly going forward,” the authors wrote. “We do not believe world oil production supply is peaking today.”
(25 April 2008)
Energy crisis forces India to join Iran gas pipeline project
Mubarak Zeb Khan, The Dawn
Differences between Pakistan and India over the Iran-Pakistan-India (IPI) gas pipeline project were resolved on Friday and the two countries agreed to start work on laying pipelines next year for procuring gas from Iran by December 2012.
Talks between the two countries to resolve the differences, mainly relating to transit fee and transportation tariff, failed in June last year, putting the $7.5 billion ‘peace pipeline’ project into cold storage. But the current energy crisis and spiralling oil prices brought them back to the table.
India showed urgency in resuming talks after the Chinese government expressed interest in joining the project, virtually replacing India.
(25 April 2008)
