(MENAFN) According to Standard &Poor, the rating agency, although the recent drop in hydrocarbon prices, if sustained, is expected to have an impact on the region's economic and financial indicators, with Bahrain and Oman being the most vulnerable, both Qatar and the UAE are expected to be mostly immune to the impact, The Peninsula Qatar reported.
S&P said that the key drivers behind the decline in oil prices are likely to be the continued increase in supply in North America, the Saudi move to cut crude prices to Asia, the strengthening US dollar, and softening demand from European and Asian economies, as well as the resumption of shipments of oil from Libya and Iraq's continuing of production despite the political conflicts in the country.
On an average, hydrocarbon revenues usually constitute 46 percent of the GCC countries' GDP and 3/4 of their total, including Qatar, with these countries expected to begin cutting out energy subsidies to deal with the current fall in oil prices, especially since it is estimated that these subsidies account for 10 percent to 35 percent of government revenues for the GCC countries.
"The recent fall in oil prices and resultant pressure on government budget is likely to bring this issue to the fore, likely resulting in higher feedstock costs for commodities producers in the region over the coming years. We've already seen government price hikes for gas supplied to Qatar Fertilizer Company and Aluminum in Bahrain," the report by S&P said.