By Abdelwahab Al-Gauyd
VIENNA, Oct 14 (KUNA) -- Fears are sweeping political and economic decision-making circles in oil-producer countries in the aftermath of the plunge of prices to less than USD 100 per barrel, recently plummeted to USD 85.
Such fears are justified as the budgets of producer states, including the Gulf countries, depend mainly on oil revenues, oil expert and economist Bashir Alya told KUNA. Therefore, officials in these petroleum economies are being absorbed in studying the reasons, hoping to halt the decline.
Major factors, and minor ones, have led to the sharp decline of oil prices, said Alya, who has written many books on economy, the last of which an economic encyclopedia of about 600 pages.
The rise of the US dollar is a main reason. It is a basic assumption that a rising American currency takes toll on petroleum. By the same token, any rise in oil prices at capital markets drags bonds down, Alya said.
The dollar has been on the rise before other major currencies, and Alya attributed this to the increase in the production of American crude oil and the rising reliance in the US on Shale oil.
US oil imports have been on the decline, for the benefit of the country's balance of trade and current account, which has pushed the dollar higher, and oil down, he explained.
One other major factor of the drop of oil prices has been the too much supply and low demand, Alya told KUNA in an interview.
According to the economic expert, storing crude oil in Europe has continued and almost hit its highest thanks to the rise in output by OPEC members and other producers, hitting 10 million barrels in Saudi Arabia daily and about three million in the North Sea.
Hidden speculations by the world's major producers to maintain their shares of the world markets have had a negative impact on prices, despite repeated calls for a unified stance inside the OPEC, especially what is related to sticking to output quotas, as the key to halt price decline.
Unfortunately, such calls went in vain, he said.
In addition, sluggish world economy and the decline in outlooks, especially the IMF has impacted on power consumption, and consequently on demand over oil by the leading industrial countries like the US, Japan and Germany, he said.
However, Alya noted that the decline of oil prices will carry on for good and will have to turn way round with the increase in the world's economic growth pace.
No doubt, purchasing power at lower prices will help enhance growth rates, which is likely to increase demand on energy, oil and gas in particular.
Alya concluded by urging the OPEC member states to play a more effective role to curb production beyond the output quotas, for their own interest in the first place, and also for the good of consumers. (end) amg.msa