Khalaf Ahmad Al Habtoor, one of the UAE’s leading businessmen, said on Wednesday that economies could benefit from the current oil price slump.
“A drop in oil prices isn’t necessarily a bad thing, in fact, it’s very positive for the majority of sector like airlines and shipping, transportation and manufacturing,” he said in a statement.
The chairman of Dubai based conglomerate Al Habtoor Group said investors “shouldn’t be overly concerned with fluctuations in the global markets” as a result of the drop in oil prices.
“The benefits of lower oil prices outweigh the negatives,” he said. “A drop in oil prices benefits many businesses. Sure, energy companies lose out, but cheaper oil is generally good for the economy and the overall stock market.
“Companies that use oil as an input experience a reduction in their cost of production. This means profit margins go up, and this can be passed on to the consumer.”
His comments came after the industry’s benchmark Brent crude price dropped by more than a dollar to a new five-year low.
In a monthly report, the Organisation of the Petroleum Exporting Countries (OPEC) forecast demand for the group’s oil will drop to 28.92mn barrels per day (bpd) in 2015, down 280,000 bpd from its previous expectation.
Al Habtoor added: “If you look at the US economy, the world’s largest economy and a significant energy consumer, it would benefit from a drop in oil prices.
“Consumers gain because gas costs less and results in higher real income which could result in increased spending. Businesses benefit from lower costs of production and higher profits, and this could lead to increased output, which means more activity in the economy.”
Earlier in the week Morgan Stanley revised its oil forecast lower, saying prices could drop as low as $43 a barrel next year.
“I believe the analysts are being more academic than practical in this instance. This is just an assessment and it has led the bears to come out,” Al Habtoor said.
Commenting on the UAE market, he said that the country has proved it can withstand global market turmoil following its recovery from the global crisis in 2008.
“The UAE has a diversified economy that is not wholly reliant on oil,” he said. “Plus the UAE government put measures in place to give itself a buffer, and it is in a better position than ever to cope with external shocks.”
