High oil prices would boost revenues and provide GCC governments additional resources for its additional expenses aimed at enhancing the standard of living of citizens, without looking to sovereign wealth funds, a report said Tuesday.
The report, released by the National Bank of Kuwait (NBK), said an increase of US$1 for a barrel of oil on current oil prices would add $4.5 billion per annum to the GCC governments’ revenues.
If the price of oil averages $100 per barrel this current year, GCC governments’ revenues would exceed $100 billion in comparison to the previous year, or 28% of expenditures set for this year, the report added.
The report said that high oil prices in the past few months have encouraged regional governments to spend extra without resorting to dipping into their sovereign wealth funds.
It said that the OPEC crude basket price increased from $75 per barrel in September 2010, to $115 in early March 2011, pushing oil prices to more than 50% from their 2010 average and 22% of their 2008 average.
The report predicted no significant oil price reduction in the short term.
The report further explained that the increase in global supply of natural gas was offset by a rise in prices compared to crude oil in recent months, thus leading to not-so-dramatic increases of fiscal revenue derived from natural gas. It added that price of natural gas (equivalent to oil barrel) in March was about $22.
The GCC’s largest economy, Saudi Arabia is set to exceed annual turnover from oil revenues of $100 through its various spending programmes this year. The programmes include a 15% increase in wages for public sector employees; a commitment to build 250,000 new homes and half of an estimated $130 billion in additional expenses to be spent this year.
