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Tue 29 Mar 2011 10:37 AM

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High oil prices not a panacea for Gulf economic woes

Rising barrel prices may hamper recovery from global financial crisis, says analyst

High oil prices not a panacea for Gulf economic woes
LIQUID GOLD CheckRisk CEO Nick Bullman said the optimum oil price for Gulf economies is around $80 a barrel (Bloomberg Images)

High oil prices will hurt Gulf economies’ prospects of recovering from the global economic downturn, forcing up the cost of imports to the region, Nick Bullman, founder and CEO of London-based consultancy firm CheckRisk said on Monday.

Speaking to Arabian Business, Bullman said: “A high oil price is of course good for the Gulf economies, but anyone who thinks it is a cure-all for all economic problems there is mistaken. The cost of oil is factored into everything. Fuel is used to import foodstuffs and building materials. The higher the oil price, the higher those fuel costs, the higher the prices at market.”

He added the optimum oil price for Gulf economies was around $80 a barrel.

“$80 is the price that puts a smile on everyone’s face. It doesn’t scare buyers away, it doesn’t cause the cost of filling cars in the West to rocket, and it’s twice the price upon which most GCC states’ fiscal budgets are predicated. If we could keep the price at $80, everyone wins,” he said.  

Asked for his thoughts on the how the Middle East uprisings would affect Gulf countries in the near term future, Pullman said the international financial community would value stability like never before.

“Institutions looking to do business in the Middle East have always factored some level of risk into their economic viability models – that risk level has obviously differed from country to country. What we are seeing today is that stability in many Middle East countries has long been a veneer, even in ones that didn’t seem obvious candidates for uprisings. The rewards now, in terms of attracting investment, for countries or places in the region that can demonstrate genuine stability, are as obvious as they are massive,” he said.

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