(MENAFNEditorial) The Gulf Organization for Industrial Consulting (GOIC) has issued an economic report on the Repercussions and Available Options in the face of oil prices decline, noting that Oil is the main source of income and the backbone of GCC economies, as its share of the GDP is approximately 47%. Without much effort, any researcher can identify the close link between GCC economic growth and oil prices and discover that oil surpluses are the first and biggest source of foreign currencies necessary for private and public sector financing to carry out development and investment projects.
According to the report prepared by the Industrial Studies and Policies Department in GOIC, The last decade was full of major events that had composite and overlapping effects on economies in the GCC and the region in general. For instance, there was an oil boom over two phases: the first was gradual and reached its peak in 2008, when the average price of an oil barrel was 94.5 USD for the OPEC basket. The second key event was the global financial crisis that started in the United States of America and reached most countries throughout the world in different degrees depending on their connection with US financial and investment markets.
The first shock of the global financial crisis on GCC countries in the end of 2008 resulted in the decrease of foreign financial investments in Gulf sovereign funds, valued at approximately 1.4 trillion USD back then. Still, GCC countries showed resilience in terms of shock absorption and dealt with aftershocks in record time. Even some European countries like Germany and Greece could not overcome the crisis that way. GCC countries' strength was in their reserves of financial surpluses and the cash flow after the gradual increase of oil prices to approximately 107.5 USD per barrel in 2011. In addition, these countries adopted economic measures to deal with the repercussions of the crisis.
Oil prices continued to increase gradually after the global financial crisis to a new peak in 2012 when the oil barrel's price was about 109.5 USD and approximately 150 USD for some types of oil.
Furthermore, the so-called Arab Spring took place and military and political bickering affected the economies of the entire region. After the signs of oil prices decline end of 2013, OPEC member states could not redress this drop by reducing production estimated at 32 million barrel a day which exceeded global demand. Since the global demand was valued at approximately 30 million USD, there was a surplus of supply, particularly with shale oil production in the USA which contributed to the decreasing of oil prices. To add insult to injury, the global demand of oil declined in parallel with an internationally slowing economic growth. Thus, oil prices reached approximately 28 to 30 USD per barrel, a first since 2003. The following schedule details average oil prices for the OPEC basket between 2003 and 2016.
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