According to some estimates, it took mankind 125 years to use the first trillion barrels of oil, whereas it is going to take us barely 30 to use the next trillion. The current scenario and the precarious demand-supply balance in the oil markets have made the prices of this precious commodity touch new heights. Consequently the oil producers are having a field day. According to some the oil producing countries of the region are passing through a period that is being dubbed by some analysts today as the, “third petro-dollar boom.”
The combined oil revenue of the Gulf Cooperation Council countries in 2004 was a staggering $190 billion - a 40 percent increase over 2003. In 2004, the average oil price was $42 a barrel. Now with oil currently in the $70 per barrel vicinity and still on the upswing, the total revenues this year are definitely going to be much higher than the year before. According to one regional economist, the total revenue of the Gulf Arab oil producers’ is to exceed the $265 billion mark this year. And even this estimate was based on an average price of $50 per barrel and the combined exports of 14.5 million barrels per day. Out of this Saudi Arabia alone is currently producing in excess of 9.5 million barrels a day, and is ready to go even beyond - indeed if required.
These are wonderful times for the oil producers of the region. The hydrocarbon resources bestowed in the region are a gift of nature in the real sense and these have to be used prudently, for the next coming generations. This sector is the single largest contributor to the GDP for all the GCC countries.
The world’s third largest oil producer - Norway - has set precedence in this regard. It places virtually all of its oil revenues in a fund created in the 1990s to take care of the future generations, in a post oil era.
At the end of June this year, its Petroleum Fund, which invests in international stocks and bonds, was valued at almost $183.7 billion, making it one of the biggest funds in the world. With the rising oil prices, the value of the fund has already ballooned by $26 billion since the beginning of the year.
This increase was attributed mainly to transfers from the state’s oil revenues. In fact the use of the oil income is very strictly regulated in Norway. The government is only allowed to use the returns on fund, which in theory is about four percent. In fact to meet the recurring expenses of the state, the Norwegians petrol prices, despite being a major oil producer, are among the highest in the world. The Norwegians pay almost $1.85 a liter at the petrol station to fill up their tanks.
Saudi Arabia is using its oil revenues for the betterment of its people and to alleviate poverty - a noble goal indeed. It used a part of its $26 billion budget surplus in 2004 to retire some of its public debts, estimated currently at $160 billion. This year also it has announced it would use part of its surplus to take care of a part of its huge public debt.
In order to diversify the economy base, it has also been decided at the highest level to raise the capital of the Industrial Development Fund, so as to support the country’s industrial sector and encourage domestic and foreign investment in industrial projects. A special allocation of $4 billion has also been made, from the additional oil revenues generated, toward industrial export promotion program, so as to provide credit service to exporters and hence boost industrial exports.
Steps are thus being taken to promote the well being of the society, from the additional income. The planners in Riyadh and the other GCC capitals have a major assignment in hand - to take care and insure the prosperity of the future generations by saving today for tomorrow. There is no harm if a cue is taken from Norway in this regard.
The oil age is still far from over. But plans need to be operational throughout the region for the ultimate - the post oil era. And there could not be a better time than the current to seriously initiate the project.