Gulf,jan.10 : Oil prices began their freefall in December, dropping below the $60 mark, continuing a bearish run that began in the second half of this year. Prices have almost halved compared to the $115 per barrel that they stood at in June.
The reasons are two-fold, according to experts: increasing supply in the market, primarily due to the growing shale oil production in the US; and decreasing demand, particularly from Asia.
Oil-exporting countries, especially those in the GCC, have, predictably, been adversely affected. With the hydrocarbon sector representing over 50 per cent of GDP and 80-90 per cent of government revenues, the impact has been palpable.
“With GCC economies heavily dependent on hydrocarbon revenues, they are in no position to influence or control the prices as in the past,” said M.R Raghu, senior vice president, Research at Kuwait Financial house (Markaz).
“Oil price is no longer a simple function of demand and supply. A host of other factors including geopolitics play a part.”
Oil ministers across the GCC have asserted that the market will correct itself, and that they have adequate buffers to support their economies. However, stock markets in the region disagree.