January 14, 2015 12:47
Dr. Haider Hussain Al Tohme
Researcher at the Center for Strategic Studies / University of Karbala
Despite the government's success in increasing Iraq's oil production, but the drop in world oil prices raised concerns economists and specialists; the fact that the national economy depends on oil revenues stunningly,
Prompting the Iraqi government to resort to implement the austerity policy in order to avoid Mhakqh.oatfq financial crisis Iraqi economists with the concerns of the International Monetary Fund from the impact of falling oil prices on Iraq's budget for 2015, critics of the Iraqi government for not preparing the necessary plans and strategies, in previous years, are contributing in the development of other productive sectors. The oil Hbotosar during the four months Almadihely below sixty dollars a barrel threshold, for the first time in years, rather than the level at which it ranged over the past four years, 100-115, what appeared to be a "collapse" in a continuing global oil price, often born of the analysis on economic and political reasons for this dramatic and rapid decline in oil prices and the threat of a challenge for Iraq, which is facing two wars, first with an internal "Daash", and the second Maosar foreign oil. This paper attempts to discuss the most prominent underlying factors behind the sudden collapse of oil prices, and provide some possible proposals for Iraq would emerge from this crisis through the following themes:
First: - the reasons behind the collapse of oil prices.
Second: - The future of oil prices.
Third: - Alaguetsadularacewankhvadosaralinvt.
Fourth: - ways to cope with falling oil supplier.
First: - the reasons behind the collapse of oil prices
Currently do not reflect global oil prices fundamental changes in market factors (supply and demand) as much as reflect the significant impacts of speculation, it has the world's oil stock markets have recently witnessed a sharp decline futures contracts for crude oil and in an exaggerated manner reflected directly in the fall in oil prices in the spot market, although Most analysts and capital markets specialists agreement that the speculative fever was confusing and exaggerated; being undone barrel of crude oil half its value during a limited period, but there are a number of factors that contributed to the slide in oil prices this way, most notably:
1-decline in global demand for crude oil:
The International Energy Agency - which advises industrialized nations on energy policies have been reduced - its forecast for growth in global oil demand in 2015, and attributed this to the survival of economic improvement is limited despite the deterioration of the oil price in the global markets for months. According to the Agency's oil consumption will grow by 900 thousand barrels per day next year to $ (93.3) million barrels per day, compared with a previous forecast of $ (93.6) million barrels per day. This is due to the economic downturn in Europe, China and Japan, which is a huge consumer market for crude oil. In this context, the International Monetary Fund estimate of the expected rate of global economic growth only in 2015 (3.6%), compared to 3.2% for 2014, which means that the increase in demand for oil would be minimal and within the limits (1.1) million barrels per day only, what the latest considerable speculation on the decline, and severe competition among the top sellers, so that the Saudi Company "Aramco" was awarded a reduction of dollars for every barrel of buyers in Asia, and 40 cents for each barrel of the United States.
2-high volume of US Strategic inventories of crude oil:
Recently released data from the US Energy Information Administration revealed that US oil inventories had increased by 5 million barrels, "US crude oil inventories total worth (361.7) million barrels." The American Petroleum Institute reported a similar increase in crude oil inventories valued at 5.1 million barrels. Often the increase in stocks Alastratejahllnaft lead to a drop in prices; because of waving the American administration more than once using this stock in the face of the oil shocks of the sudden.
3-glut world oil markets:
Caused by excess oil supplies decline in prices amounted to about 50% in the past six months, and producers are now stuck in a battle over who will cut production to restore balance to the oil market. Revolution oil shale, gas and generated from the glut in global oil markets has been an important role in the low price levels. The high level of oil prices since the beginning of the third millennium contributed to stimulate oil companies access to these costly industry, and led the stability of oil prices on the threshold of ($ 100) - with the exception of 2009, where prices fell sharply due to the global financial crisis -ely growth of this booming production kind of unconventional oil, has led to the acquisition of shale oil to nearly five oil market, which has caused increase in oil supply and then drop Alosar.vanteg oil shale in North America levels continues to rise, about one million barrels per day in the year. " The rate of production in North America toward record (18.1) million barrels per day in 2013, and about (19.6) million barrels per day in 2014, is expected to rise about Alantegely (20.7) million barrels per day in 2015 ". While production capacity is estimated to nearly all OPEC countries (31) million barrels per day.
4-receding product likely role:
Helped reaction from OPEC in the rapid decline of prices. Vadh is that these countries take the lead role is likely to adopt the product, any reduction in production at declining prices, or increase it at high prices. Based product likely policy adopted by Saudi Arabia, UAE and Kuwait in the previous decades, to adopt such a policy first, and then negotiate with the rest of the member countries of OPEC, to coordinate and adopt a similar policy, if were to reduce production, to bear all the Member States of OPEC this responsibility, albeit so at different rates in some cases, but it is striking now, the major producing countries decided to wait and not to reduce their production. On the other hand, there are three members of the OPEC countries are not prepared to reduce production: Libya, for example, is going to increase their production and is not reduced. It is expected from Libya apologize for reducing production after the average dropped to about 200 thousand barrels per day during the Alokhirh.fahi months now trying to increase production from the current level of about 900 thousand barrels per day, despite the political turmoil there. Iran is also trying to break free from the international embargo imposed on it because of its nuclear program, which cut its exports to less than one million barrels per day, compared to about 2.5 million barrels per day before the blockade. Iraq is trying to turn increase production to compensate for the contraction and stopped production for many years, as well as the urgent need to Aaadhalaamar and countering terrorism, not to mention contracts with international oil companies that require increased production commitments.
5. The position of the Kingdom of Saudi Arabia from the deterioration of oil prices
In the economic context, a number of experts believe that the lack of adoption of the Kingdom of Saudi Arabia for any decision on the reduction was caused by the new challenge imposed by shale oil production in North America, The Kingdom is aware that the oil market is suffering from a glut in supply, and that any attempt to reduce the production ceiling will not write it success if the United States used the strategic Khozinha or if Western oil companies did not cooperate in similarly cut production, "which is unlikely." Therefore, the consequences will be severe for the UK, you may lose a large part of the oil market, in the time that you can fill the shortage in Saudi production easily from several parties before. Another view calls into question the good intentions of the Kingdom to support low oil prices to support global economic growth, where a team of researchers finds that Saudi Arabia intended to further decline Alosarlogelazahh new global product of the oil market, as unconventional oil poses a dilemma for OPEC oil major. However, the cost of producing a barrel of oil shale ranging between (40-70) dollars, and will not be able to rock the oil companies in the short term to withstand much emphasis Alosarely deterioration without the $ 60, and thus curtail the role of oil shale in the international energy map will not restores the lead in determining global oil prices, according to the UK, but will work in the future to tighten domination Arabia again on energy exports to the United States and other countries of the world.
Second: - The future of oil prices
Is the deterioration of oil prices continue? .In The short term - the next six months - Oil prices will not improve much and will not fall too much, it is expected that oil prices swung over the next six months between ($ 50-70) until the emergence of a more precise path of the global economy Features , with the expected direction of oil prices on the rise again after this driven by a host of factors, duration, perhaps the most important:
1-The decline in oil prices over the past few months and stability under $ sixty threshold will stimulate significantly the growth of the global economy, especially the Asian economies (China and Japan), which recently have declined in their data quarterly; because of the greed of power consumption (China world's second largest consumer of energy) and will stimulate economic growth, in turn raising the demand for energy rates, which will drive the direction of prices towards the rise again, with Oxford Economics estimates that each fell by 20 dollars in the price of oil increases global growth rate (0.4%) within two to three years . According to the basic simulation of the International Monetary Fund to the similar size of the effect, therefore, a decline of 40 dollars in the price may compensate for what is more than a drop Total by (0.5) percentage points in global economic growth forecast from the International Monetary Fund for the period between 2014 and 2016, During the past year. That increase, is strengthened thereafter whether generate a recovery in confidence later, encourages companies to invest and spend.
2. ranging cost of shale oil production - which accounts for about 20% of the world's oil supply - between (40-70). Several reports have revealed that a large part of the shale oil production will come out of the arena of competition if global oil prices continued to fall below the 70 dollars, the problem of oil shale "unconventional oil", not only on the high cost of extraction but on limited the cost of transportation as well as the transfer of barrels of Gulf oil costs about 3 dollars, while requiring the transfer of one barrel of oil shale (12-15) dollars, and this goes back to that most of the oil shale - production, especially in Canada - resulting in remote areas far from the coasts and ports of export. From the above highlights the importance of the challenge for rock oil producers about the continuing deterioration of oil prices. It is likely quite a few Alm_khastin that oil production of shale receded significantly, not only because of falling oil prices and lower corporate profits produced, but also harder for companies producing shale oil (in charge) the necessary funds to finance productive activities, especially with the deterioration of the shares of these companies significantly Prices During the past few weeks as a result of deterioration in crude oil prices. The decline in oil shale industry limits (25%) to say the least, with the assumption that the supply of conventional oil stability, will contribute to reducing the global supply of crude oil (5%) at least, and is bound to push prices towards the aspect ratio. It is noteworthy that several Western companies have recently announced sharp reductions in planned capital expenditures, and is located at the front of this corporate rock oil producers in the US Altdh.omen examples of this, ConocoPhillips, which announced cuts in capital expenditures amounted to about (20%) compared to the year 2014. I did the same thing Marathon Oil Company. All this indicates a decrease in the number of shale oil wells that will be drilled next year, and then decrease its production as well. And thus is expected to be the end of the current wave of falling oil prices stage, and stability at current rates with the possibility of a future rise and decline of the role of the oil-producing companies from non-traditional sources.
3. The media recently unveiled forthcoming meeting of OPEC, Russia and a number of oil producers to discuss ways to cope with the continuing deterioration of oil prices. It is likely that any agreement between the leads top oil producers about reducing production quotas in lifting crude oil prices again, especially since Russia and a number of top crude oil producers will not stand idly about the deterioration of economic indicators to their own countries.
Third: - Alaguetsadalaragiwtdaaaat Ankhvadosaralinvt
Iraq is losing more than a billion dollars a year with each drop of $ single in the price of a barrel of oil, which issued, and that the decline in those Alosaradhar the Iraqi economy and exacerbating the budget deficit, and in particular that the economy depends rate (95%) on oil imports. Features stumbled Iraqi economy has started because of the collapse of oil prices to emerge with the end of the Council of Ministers of the preparation of the budget in 2015, has revealed preliminary figures from a large deficit in the general budget of up to 23 trillion dollars, despite the overhead of state pressure significantly. The Iraqi government has consistently years ago to be investment spending is a victim of any drop in oil prices, which means the wheel of reconstruction and construction stopped, at a time when the country is suffering from a serious deterioration in the infrastructure as a result of the heavy legacy of decades before the American occupation of Iraq in 2003, as well as the terror that swept the country after this date. On the other hand, is expected to hit the paralysis of the Iraqi economy after receiving information about the austerity plan is expected to affect employees' salaries if oil prices continue to fall, as well as the government's intention to raise the levels of taxation on a number of goods and services and to pursue the idea of compulsory savings from, or what it calls the government. " National savings "; for in order to overcome the difficulties of the decline in oil revenues. Economic and social impacts will not stop at this point, but also will expand to affect the agricultural, industrial and service sector, with promises not to the security and the health sector of the country affected.
Fourth: - ways to cope with falling oil supplier
There is no doubt that the shock of falling oil revenues was a surprise to most of the oil countries and especially Iraq; being locked in an internal war with "Daash", as well as the reconstruction of the files are areas that have seen fighting, and extending a helping hand to the displaced migrants and provide cash and goods and services that contribute to the alleviation of suffering, All of this requires funding does not open austerity plan. However, such a financial shock might bring financial regulation of the budget and the economy and emphasizes state control over public money and the fight against corruption as well as working to reduce unnecessary expenses addicted by the government because of oil revenues; therefore the government should develop a plan for the short and long term, help rally the rationalization of expenditures and revenues, as follows:
1. reforming the tax system, through the enactment of a number of laws that contribute to the expansion of tax bases, and the reduction of tax evasion, and the identification of new rates for taxes is consistent with the estimated Altklevah citizen, taking into consideration not burdening the poor and middle classes, as well as to activate the work of the tax administration and eliminate the rampant corruption for decades. It is noteworthy that the proportion of tax contribution in the budget does not exceed 2%, while the rate exceeds the contribution of tax revenue in a country like Norway, more than (60%).
2. restructuring of state-owned industries and the gradual shift towards the private sector, with the former public budgets reveal that the support and funding of these industries did not improve the economic performance, what most public projects remains mired in losses, and what you add to the government, much less revenue than specialization government has of wages and salaries and support, which requires stopping the work of these projects and restructure.
3. The pressure operating expenses by rationalizing non-essential expenses, which cost the budget sums of money, it is about furniture and travel costs (Aivadat officials) and the purchase of luxury cars, and work to reduce the armies of the protections and staff for the three presidencies, and reduce the salaries and allowances of the higher grades.
4. tighten controls in all departments and ministries of the state to reduce corruption and detect phantom projects that cost the state billions of dollars annually, as well as a comprehensive survey to verify the aliens.
5. mobilize the savings of the household sector by issuing bonds small denominations and attractive interest rates stimulate individuals to the IPO, and this measure would provide funds do not dress out for the government as well as to reduce the consumption of non-essential and recreational which has become a culture of the Iraqi consumer.
1. Create a sovereign fund for Iraq's wealth works as a buffer Mali, as collateral for future generations, by saving part of the oil revenues and invest these savings in a financial portfolio Mtnoah.ivkr that Saudi Arabia has protectors fiscal terms to compensate for the effect of any local deficit likely due to falling oil prices, as Tqdraanaatadthaalmalah b (740) billion dollars, working mostly on offset some of the negative effects of oil prices are very low.
2-activate the tourism sector of the country and take advantage of religious tourism in supplying and financing of the general budget in foreign currency, as the number of tourist arrivals is estimated to Iraq during the year 2014, nearly 10 million tourists.
3-increase oil production and revision of the agreements between the government and foreign-invested enterprises productivity plans.
4-stop wasting natural gas through contracts with international companies specialized, giving Iraq an important source of export Airadabr, and limits the import Alghazmn neighboring countries.
5-feminine government through restructuring and merging ministries and government departments in line with the actual need.
6-action to recover all the money seized in the various countries of the world through the revitalization of Iraq's ambassadors in these countries.
7-a shift from the public sector to the private sector through privatization of public enterprises which incur budget huge amounts of money without any mention of return.
8. activate the productive sectors, particularly agriculture and petrochemical industries, and promotion in order to diversify the Iraqi economy and freeing it from the structural imbalance caused by chronic dependence on oil.
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