Abu Dhabi’s Head Of Department Of Economic Development Claims Low Oil Prices Could Trigger Economic Growth
The Organization of Petroleum Exporting Countries' (OPEC) fourth-largest oil producer, United Arab Emirates, is more likely to see a rising economy as oil price in Abu Dhabi drops low enough to $50 per barrel, reported Bloomberg Business.
According to the head of Abu Dhabi's Department of Economic Development Ali Al Mansoori, the current oil price is a "gift to the world" as prices will expectedly increase to $60 in 2016 after dropping at its lowest at $45 per barrel.
International benchmark for oil price Brent crude has decreased by 17 percent this year due to global oversupply and was observed trading oil barrels on Monday at $47.75.
"It is a gift to the world that oil has dropped to $50," said Al Mansoori. "Would we like for oil to stay at $50? Absolutely not. We would like oil to go to $70, $80, but beyond that I think it would hurt the economic growth."
In 2014, oil prices dropped significantly as shale production in U.S. and OPEC increased, while global demand decreased, pushing oil-producing countries, including U.A.E. and Saudi Arabia, to lower their oil prices.
According to Business Insider, economist Gary Shilling noted that this production dynamic of the U.S. and OPEC could send oil prices dropping to $10 to $ 20 per barrel.
"For a decade, OPEC output has been essentially flat with all the growth going to Canadian oil sands, American frackers and other non-OPEC producers," noted Shilling.
"OPEC got tired of restraining production to maintain oil prices while others increased market share," he added. "So it is playing a game of chicken by producing flat-out to force other major producers to chicken out and cut production. In this price war, the margin cost of production will probably be the chicken out price, and that's $10 to $20 per barrel at the Permian Basin and in the Persian Gulf."
Al Mansoori considers the $50 to $60 price for oil per barrel is a win-win situation for both producers and consumers. It will buy enough time for the government to revamp economic plans for the coming five years.
A low oil price indicates a stall in U.A.E.'s gross domestic growth next year, but Al Mansoori is focused on keeping the economy afloat until it completely recovers by 2017.
