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‘Oil prices falling for slowdown of economic growth’

Oil prices have been falling significantly. The Gulf countries are trying to deal with the decline, as their economies mostly depend on oil revenues.

Feyza Gumusluoglu spoke to Qatar’s former energy and industry minister and ex-president of the Qatar Administrative Control and Transparency Authority, Abdullah bin Hamad Al Attiyah, who recently established the International Foundation for Energy and Sustainable Development.

enegynewsbd.com has picked the interview as a worthy piece for its valued readers. Here is the full text:

Question: Will oil prices continue to decline? How do you predict the future of the prices?

Abdullah: When we look at the history of oil prices, we can see that it is not something new. We experienced the first oil shock in 1973, and then the oil price went up again, to reach almost $40. Then in 1985, we suddenly saw the oil prices going so low, even below $10. From 1985 until 2000, for 15 years the average price of oil was $16-17. It took 15 years for the price to increase after 2000 to reach $115-120. Now we see it hitting the lowest even below the 40s. In reality we went back to the 1990s price, considering the value of US dollar. This is a circle, it is not something new. My expectation today is that it will take years for oil to go back to normal again.

Q: What is the main reason behind this decline?

Abdullah: Now economic growth has been slowing in many countries like China, India, European nations, etc. Their economies are in a slowdown. So, the demand for oil has decreased. Also, the production of shale oil for the last few years has gone up, especially in the US. Producing shale oil was very expensive. Now you see that there is almost 2 million barrels of oversupply in the market. Stocks especially in the US are at their highest, demand is low. There is more oil coming into the market either from Opec producers or non-Opec countries such as Russia. We cannot predict that the price will increase in a few years, it is impossible. Unless Opec and non-Opec major producers sit together and try to cut some of the production.

Q: So Opec alone cannot do anything?

Abdullah: It can be solved only if all oil producers come together, not only Opec. Because Opec now can no longer control the market. Their share in the 1990s was almost 60 percent. Now it dropped to 30 percent. So they cannot do it alone. They have no more influence. Unless they receive a very strong commitment from the other producers. Even if Opec today decreases the production, they will be the losers because the others will take the share of the market and it will not be reasonable. The market will not react. They have to sit together and agree on how to cut the production.

Q: Is this purely an economic decision or more political?

Abdullah: It is economic. We hear those conspiracy theories but I don’t believe in them. I can assure you that there is no conspiracy. They say that they may have done it against Iran and Russia, but it is not true. Because at the end of the day, everyone will lose. Opec producers are heavily dependent on oil, they would shoot themselves. I have been in this business for the last 40 years, I can assure you that there is no conspiracy theory in this. Iran is a member of Opec, they know that Opec cannot do it. It is totally economic, it is about demand and supply. And where did this extra production come from? Not from Opec, from others! All of them are suffering now. There is no one to blame. When you are all suffering, all should sit and solve it, instead of waiting for somebody else to come and do it.

Q: How will the Gulf countries manage this crisis?

Abdullah: This is not new for them. It is not the first time and will not be the last. When you live in a dynamic economy, this is the cycle. There are good days and there are bad days. Yes, the Gulf countries will be affected for sure, because they are heavily dependent on oil revenues for their budget. But it is time for them to restructure their economies, shrink their budgets, cut some expenses. They have to accommodate themselves. Oil price always goes up and down very fast, it does not give you time to prepare yourself. We have always been advising our people, because they have a short memory. When we have a flourishing economy, expenditures increase, people forget until they get another shock.

Q: How will this affect Qatar’s budget?

Abdullah: The government is offering a lot. Qataris and even non-Qataris enjoy a heaven. No income tax, subsidised electricity, water, oil is very cheap, education is very cheap. We are a very unique country. Back in the 1990s we had this oil problem and we managed it. We tried to cut the fat, restructured the budget. I can assure you that Qatar can live well with low oil prices. We are a small country, we can manage it. H H the Emir’s recent speech in the Shura Council was a very nice statement. I call it a wake up call to the people, meaning that the government is always with the people, supporting them, but now it is time to help each other. We know that oil prices will go up again, but during this period we have to build a bridge, slow down instead of going at a high speed in order to control this crisis. I believe Qatar will manage this.

Q: What is the plan for post-oil era?

Abdullah: We always remember that oil and gas are limited resources and they are not renewable. They will be gone one day, after 80 or 100 years. For us it is a long period, but for next generation it is short. We always ask ourselves this question, what after oil and gas? We do not want to go back to where we were before. That is why we have economic diversification, sovereign wealth fund, investment, creating alternative revenues, investing in education, high technology. Qatar is a small country, a small country always moves faster than the big ones. We must search for our way after oil and gas.

Q: Most people are curious about this: Will Qatar implement taxation?

Abdullah: We already have taxation for foreign companies. We impose taxes on them. But I believe the government will not think about income tax anytime soon. They will think of other measures first. For electricity and water support, it will continue but there will be corrections in the subsidy. It will take place gradually, you cannot do it in one day. You should convince the people, give them good reason. If you compare Gulf countries to others, they are still way better. Everyone should make a sacrifice for his/her country during difficult times. We cannot just ask all the time without giving anything in return. And we do not ask for a big sacrifice at all.

Q: Is there a strategy to raise awareness about reducing wastage of electricity and power?

Abdullah: When I was the minister of energy, power was under my charge. I always told people, “This is gift from God. Our water is desalinated, it is very expensive. Power, too. So, please do not waste it.” Today, more than 30 percent is wasted. People should have awareness in order to reduce consumption. They leave the lights or air conditioning on even when they leave their homes. Personally, I try to educate my children. Of course, the government also has a plan. It started even before this crisis. We started putting out public advertisements in newspapers and TV channels about water and electricity. We introduced TV series, cartoons for children, we distribute some publications in schools. The recent speech of H H the Emir also created a lot of awareness.

Q: Oil and gas are highly subsidised in Qatar. Will this continue?

Abdullah: We already tried to change it a little, even during my days as a minister. It used to be cheaper than it is now, we increased it. If you see our first report from my foundation, titled “reversing the trend in domestic energy consumptions in the GCC”, it shows how the local consumption is very high and price is low. If we do nothing, in 15 to 20 years we may stop exporting oil. The manner of consumption should change. In Qatar, because of cheap petrol, we have a traffic jam. This is also part of the sacrifice. The government will increase it gradually, they have no choice. Even if the oil prices go up again, we have to change our habits. People here, not only Qataris, even foreigners have big cars. Because of cheap petrol, they do not drive small cars. These habits should change.

Q: In the end, could you tell us more about your new foundation?

Abdullah: When I left after spending 40 years in the energy sector, I said I cannot go home, I needed to work. So, I established this foundation. It was my dream to create a non-profit energy foundation that will hopefully survive even after me. It is not inherited, and my children have no share. We raise funds mainly from donations. We are not funded by the government, it is a totally independent foundation.

The interview was first published Qatar’s Daily Newspaper The Peninsula on November 25, 2015.

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