The International Monetary Fund (IMF) reports Middle Eastern economies lost out on nearly $400 billion in oil revenues in 2015 thanks largely to several Middle Eastern countries deciding to drive down the price of oil.
Along with missing out on $390 billion last year, the IMF also projects the countries will contend with $150 million in losses throughout 2016 as a result of bottom of the barrel oil prices.
The drop coincides with the plunge in oil prices from $114 a barrel starting in 2014 to a low of $30 toward the beginning of 2016, according to the IMF.
Several countries in the Middle East are taking drastic measures to confront the specter of lost oil revenue, including Saudi Arabia, which has begun cutting energy subsidies and raising taxes to fill the gap.
“2016 is year number two in a multi-year adjustment process to reach balanced budgets,” Masood Ahmed, director of the IMF’s Middle East, told the Wall Street Journal Monday.
Ahmed continued: “Probably another four to five years of action will be needed both on spending and on revenues before reaching a comfortable fiscal situation for many countries.”
Saudi Arabia, among others, had ample time to ready itself for a massive economic downturn as a result of its decision to tamper with energy markets. The Persian Gulf countries were warned in 2015 about efforts to drive down oil prices to push natural gas developers, Iranian and U.S. oil exports out of the market.
The IMF raised a red flag in 2015, warning Saudi Arabia it was facing a budget deficit of $140 billion — or roughly 20 percent of the oil-dependent country’s economy.
The fund said that if Saudi Arabia, with the help of other members of the Organization of Petroleum Exporting Countries (OPEC), continued to drive down oil prices, then it would likely see fiscal reserves depleted within the decade.
Energy market insiders held their collective breaths in early April, hoping that Saudi Arabia, OPEC- and non-OPEC nations, and Russia would hammer out a deal in Doha, Qatar to bring a freeze to oil output.
The talks broke down as all sides refused to come to terms on the deal.
Energy analysts now insist Saudi Arabia is likely to damn the torpedoes and continue pumping.
“In the post-Doha world, when we’re still in what is essentially a free market for oil, they (the Russians) will pump as much oil out as the market will absorb and the Saudis have said much the same thing,” Neil Atkinson, the head of the International Energy Agency (IEA), told CNBC on Friday.
He continued: “We’re back to where we were before Doha where people produce what they can, sell what they can for whatever price they can achieve and the market takes care of the surpluses in time.”
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