Challenged by the Decreased Price of Oil: Adjustment Policies in the Arab Gulf and Beyond since 2014

The downhill slide in the global price of crude oil, which started in mid-2014 and reached its deepest point in January 2016, has had major repercussions within all the countries of the Middle East. After the Arab Uprisings of 2011, this has been a second shock within the region, one that has imposed constraints but also constituted opportunities. Major constraints have arisen due to the generally high share of oil income within state budgets – which is especially true for the Arab monarchies in the Gulf. State spending, which increased heavily after 2010, almost exclusively depends on earnings from the hydrocarbon sector. The decline of the oil price and its subsequent oscillation have led to a lack of financial resources (oil rents), which has restricted states’ room for manoeuvre with regard to domestic (e.g. welfare state and economic diversification) and foreign (petrodollar diplomacy) policies. These effects are also relevant for most of the non-oil-producing countries in the region, since they depend heavily on payments from oil producers such as investments, loans, direct budget support, and labour remittances. At the same time, during periods of declining government income opportunities emerge. Lower oil revenues result in less ambitious spending schemes and can potentially strengthen reform-oriented segments within the elite. It is hoped that these groups might eventually start reforming government bureaucracies, seriously tackle the issue of corruption, and even initiate the promotion of job-generating industries.

In the context of developments since 2014, this workshop has two major aims: First, to explore what political and economic reforms rentier and semi-rentier states have (not) implemented under conditions of declining oil abundance. And second, to sharpen our understanding of what factors explain the similarities as well as the differences in adjustment strategies across these countries.

On 15 March 2019, a public event on "The Decreased Price of Oil as a Challenge for Lebanon" will be held at the offices of the Lebanese Oil and Gas Initiative (LOGI) at 11:00 a.m.