As the US careens towards the "fiscal cliff," I thought I would take a brief moment to give you a little insight on how countries in the Middle East balance their budgets.
The countries of the Gulf Cooperation Council (GCC) - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates - are all major oil exporters. And not surprisingly, oil revenues make up a large proportion of their governments' income.
In order for these countries to balance their budgets, they can work through OPEC (the Organization for Petroleum-Exporting Countries) to set the price of oil at a level high enough to balance their budgets. The list below shows where each of the GCC countries needed to keep the price of oil in 2012 in order to break even on their budgets.
Bahrain - $110
Kuwait - $60
Oman - $90
Qatar - $55
Saudi Arabia - $85
United Arab Emirates - $80
So as you can see, there's no complicated political wrangling in these countries when it comes to putting together a government budget. The US and the EU countries may have problems ironing out their budgets, but not the countries in the GCC. The governments here write whatever budget they need or want - then set the price of oil in order to be sure the rest of the world can fund all of their expenditures. Simple.
[As a final note on all of this, the "shale oil boom" in the US and other countries has the potential to change the shape of global petro-politics, but that won't happen until production increases substantially. And that will take several years. In the meantime, I would say we should all look for oil prices to remain about where they are now - north of $85 per barrel].
The countries of the Gulf Cooperation Council (GCC) - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates - are all major oil exporters. And not surprisingly, oil revenues make up a large proportion of their governments' income.
In order for these countries to balance their budgets, they can work through OPEC (the Organization for Petroleum-Exporting Countries) to set the price of oil at a level high enough to balance their budgets. The list below shows where each of the GCC countries needed to keep the price of oil in 2012 in order to break even on their budgets.
Bahrain - $110
Kuwait - $60
Oman - $90
Qatar - $55
Saudi Arabia - $85
United Arab Emirates - $80
So as you can see, there's no complicated political wrangling in these countries when it comes to putting together a government budget. The US and the EU countries may have problems ironing out their budgets, but not the countries in the GCC. The governments here write whatever budget they need or want - then set the price of oil in order to be sure the rest of the world can fund all of their expenditures. Simple.
[As a final note on all of this, the "shale oil boom" in the US and other countries has the potential to change the shape of global petro-politics, but that won't happen until production increases substantially. And that will take several years. In the meantime, I would say we should all look for oil prices to remain about where they are now - north of $85 per barrel].
