Millhouse

Oil just hit 45$. Lowest price for over 6 years.

Low oil prices are never a good thing for the GCC, but just how ****ed is it going to be?

As I see it, history will repeat itself...

Oil producers in MENA (i.e. the GCC) will be forced to tighten budgets soon - this means the deferral of capital expenditure and some fancy projects. Hopefully this will remove some of the marginal projects in the region without a total destruction like last time. Interest rates have increased only a little bit which is a good thing.

The non-oil producers will only benefit a little from this... while the subsidy burden will fall (already many subsidies have been removed), the level of GCC remittances will fall (as will GCC donor support). The poor man will be better off and the simple/ real economies will improve. However, while it is hard to judge the overall affect on these countries, my guess is that the governments budgets will shrink as a result of the inability to collect taxes from an improving economy. Overall affect on things we care about (i.e. projects) is not going to be great.

I also believe that the war dividend has been paid. I can't see how the UAE is still receiving inflows from Syria etc.

With western economies picking up due to the low oil prices (which could lead to expats leaving), egypt improving, and russian being bankrupt my typically negative outlook for the region will prevail.

Brains1983

Interesting article on how much production would be at a loss if prices continue to fall. Oil production costs: When and where the price of crude is making it unprofitable.

I gues it's not really connected to your post Millhouse though.

Millhouse

I do like that video. It also backs my theory that the low-balling pricing doesn't really have a massive impact on production. At US$40 we only lose 2% of global production... we lost more than that when we took out Iraq, or another other war-torn hell.

I maintain it's demand and not supply and we are doomed.

shiva

don't worry the impeding war against is/isis/isil/daesh or whatever we are calling them now will keep things ticking over nicely

Millhouse

ah, the day the cross the border into Saudi or Iran will be an interesting one...

shiva

and the day to leave probably

Millhouse

Well Iran have already beaten back from the Iraqi boarder, so I think it'll be off the cards for a while.

The saudi's have recently built that long french controlled fence across the border. It would be a stupid ISIS to take that on.

Boomhauer

GCC countries deliberately lowered the price of oil to make American crude obtained by fracking to be economically less viable .

Maybee the GCC also brought the price down to screw over Russia? at the behest of the West?

Millhouse

This is media driven nonsense. Fracking is cheap to start and stop, this is why it has grown so quickly.

The GCC have not increased production. They have simply not decreased when the US increased. One could argue that the market is working correctly and the US oil should compete in the open market.

Remember, Capitalisim only works one way in the US.

shiva

iran wants to increasingly stay out of trouble if possible.

isis......mad bastards so anythings possible but i guarantee we will ramp up our presence in Iraq soon which will keep the saudi thing out of the question.

they have enough internal shite these days to keep them busy anyway

littlejimmy

Sorry to take this off-topic, but is this true? I was asking about Egypt on a thread in the parent forum and didn't get much back. I have got a potential job there and was wondering what the situation is on the ground.

Millhouse

yes. I would say so.

I disagree with the post you got saying it's unsafe. Obviously it is not Dubai or Qatar, but I was going there even during the revolution and it was fine. It's ok now.

My Egyptian friends and colleagues are happier again (and feel safer - for a while they did feel very unsafe, not me), the rule of law is returning, investors are lining up in a very big way and most see it as back. The government appears stable, and are engaging positively with population, donors and investors.

Of course, I think it's only becoming an investment destination as the region of the region is so shit - it's all relative.

NewCaledonia

I am curious about two things:

- Saudi Arabia. It is a hot pot. With less money to spend, I can't see how the number of revolts / discontent / terrorism will not increase. Also, the Saud Royals are there because of the US. If oil becomes more and more marginal to the US (sustainable energies + fracking), the US can care "less" about the Sauds. Vicious circle I see here.

- Dubai and its real estate bubble. Most investors come from around the UAE. With commodities and oil in general going down, that has a negative impact on pretty much every other country in the region (Saudi, Iran, Irak...). So you will get in Dubai:

1. Prices out of control at record peaks (Manhattan prices).
2. Buyers will likely shrink (unless I am wrong, and they will further take their money out to Dubai; like Greeks buying property in London when their country menaced to leave the Euro)
3. While we all heard a trillion times this "Dubai does not depend on oil", which this partially BS. Dubai is a service hub for the region; so many consultancies or professional services serve Saudi or Iraq from an office in livable Dubai. With those countries going down, Dubai should be hit in the short term.

NewCaledonia

Oh I just remember.

Exactly two months ago I started a thread about this:

http://britishexpats.com/forum/middl...impact-846978/

It was almost twice the price at that time!

NewCaledonia

They try

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