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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    It starts with the budget and ends with salaries.. What are the repercussions of the decline in oil

    Rocky
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    It starts with the budget and ends with salaries.. What are the repercussions of the decline in oil Empty It starts with the budget and ends with salaries.. What are the repercussions of the decline in oil

    Post by Rocky Wed 04 Sep 2024, 5:06 am

    It starts with the budget and ends with salaries.. What are the repercussions of the decline in oil prices on Iraq?


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    2024-09-03 15:31
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    Shafaq News/ Specialists confirm that the decline in global oil prices to below $70 per barrel will directly affect the investment and operational budget for commodity and service issues and the economic movement in general in the country. Salaries are the last thing that will be affected, as Iraq is able to pay salaries for at least three years.
    The oil equation is international, and this equation “makes the United States - the major player in it, as it is an oil producer and exporter - look for oil prices at levels of $50 to $70 per barrel, given that it exports its oil at around $50 to $55, and when exporting at $70, this is profitable for its oil companies, and at the same time it imports oil of other types that it uses in many things, so it does not want oil prices to be high,” according to the economic and financial expert, Mustafa Hantoush.
    Hantoush added to Shafak News Agency, "The European partners of America are currently suffering from high prices of fuel, oil, gas and others, and Europe is a key partner of America, which prompts the latter to seek stability in oil prices below $80 per barrel, while the OPEC+ group is looking for levels above $70, as it sees levels of $75 to $80 per barrel as a fair price for the price of a barrel of oil, so there are two visions and two international equations for oil prices."
    He explains that “global oil prices do not come from global growth, which is currently slowing down, on the one hand, and on the other hand, some clean energies - although oil is ten times cheaper - have started to play specific roles, and there is also a basic issue, which is that the supply of oil is not small, and Russia is currently smuggling oil and selling it at prices below $60 per barrel, which leads to a decrease in oil prices.”
    He added, "The Russian-Ukrainian war is coming to an end, and in light of the lack of growth in global economies and inflation on the other hand, all of these things make oil prices vulnerable to falling below $70 per barrel, and this price may continue for a certain period."
    As for Iraq and its connection to oil, “Iraq depends on oil by 90%, and this is a large number. If oil prices fall below $70 per barrel, I believe that Iraq is able to pay salaries for at least three years, especially with the abundance in the years 2022, 2023 and 2024, in which oil prices reached above $70 per barrel, in addition to the existence of reserves for the Central Bank and high dollar reserves. As for the issue of the Iraqi dinar, it is an internal issue and has nothing to do with revenues and is resolved through monetary policies,” according to Hantoush.
    The expert reassures that "employee salaries are not a problem even if oil prices fall below $70, but as an investment aspect, here a problem may arise with the delay and halting of some projects, as happened in 2015 and 2020 with the decline in oil prices, so the fear is only in the investment aspect."
    Hantoush concluded by saying, "The biggest concern remains in opening up domestic investments in industry, agriculture, tourism, transportation from the port of Faw and transportation routes, as well as the external economy and achieving self-sufficiency in electricity and other things. Therefore, in order to get rid of the rentier oil revenues, we must rely on opening up the domestic and external economy."
    In turn, the member of the Parliamentary Oil and Gas Committee, Basem Al-Gharibawi, explained that “OPEC requested a reduction in exports from member states in order to maintain prices, as oil prices are subject to supply and demand, and prices were above $80 and have now fallen to maintain the existing price.”
    Al-Gharibawi pointed out during his interview with Shafak News Agency, "Reducing exports affects the budget deficit that is paid from the price difference, but it will not affect the amounts included in the 2023 plan."
    As for the member of the Parliamentary Finance Committee, Mustafa Al-Karawi, he says, “The budget is based on 90% of oil revenues, and whenever the price of oil changes, there will be a direct impact on the budget, and thus whenever global oil prices decrease, there will be a deficit in the budget’s achievement rate.”
    Al-Karawi confirmed to Shafaq News Agency, "Salaries will not be affected because the salary ceiling is much lower than the ceiling in effect in the budget, but the investment budget will be directly affected, as well as the operational budget for commodity and service issues according to the priorities set by the government, as well as the economic movement in general in the country, but salaries are the last thing that will be affected."
    Regarding the mechanism that the Ministry of Oil relies on to price Iraqi oil, the ministry’s spokesman, Asim Jihad, says, “Before the end of each month, the ministry’s cadres meet to review the developments in the oil market, and in light of that, Iraqi oil is priced according to quality, density, and markets. Therefore, it is a monthly price, not a daily one, and oil marketing contracts are concluded with international companies according to this mechanism.”
    Jihad explained to Shafaq News Agency, "The developments in the oil market, whether positive or negative, do not only affect Iraq, but also the producing countries and the oil market, which are always exposed to geopolitical, economic, health, security and other challenges and circumstances that are reflected in oil prices."
    He added, "However, the OPEC Plus agreement aims to achieve balance and stability in the global oil markets, and this is what it is working on. OPEC Plus has confronted many of the challenges and difficult circumstances that the global oil markets have faced by taking a set of measures by collective decision to confront these challenges and restore health to the oil market."
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