Bank of America points to boost to GCC finances

According to a statement by Bank of America - better known as BofA - the oil-exporting countries of the GCC - Cooperation Council for the Arab States of the Gulf - will benefit from high oil prices and the EU's eagerness to seek alternative energy sources to Russian hydrocarbons.  

BofA's director and economist for MENA, Jean-Michel Saliba, said we would see "fiscal surpluses in all Gulf countries" for the remainder of the year.  

Following the US president's statement that the US would stop importing Russian gas and coal, oil prices rose above $130 a barrel on Tuesday, their highest since 2008.   

The move is one of a series of US sanctions against Russia following President Vladimir Putin's decision to invade Ukraine. The sanction is one of the biggest penalties imposed on the country, and is aimed at freezing Russian markets and further isolating its economy.  

Brent crude oil, which is a benchmark for oil prices in markets around the world, reached a price of $116.60 per barrel. Meanwhile, West Texas Intermediate, a benchmark that tracks US crude oil, was worth $112.60 at midday on Tuesday.   

Following the US president's statement and the rise in oil prices, the UAE's envoy to the US said the UAE supported increased production to support the market in these difficult times. This news caused prices to fall again in the US.  

The United States has been the first to take the step of banning Russian oil imports. The European Union, however, has not yet followed suit, but the organisation pledged on Tuesday to eliminate them by the end of this year. Russia is Europe's main oil and gas exporter, which is why the EU is actively seeking alternative sources of oil and gas.  

According to BofA predictions, the average oil price is expected to reach $110 per barrel this year if the conflict is resolved soon. But if the war in Ukraine continues for much longer, the price could reach $130 per barrel by 2022. The head of frontier markets research at BofA, Hootan Yazhari, expressed concern about the rising oil prices and said that this situation was "very damaging".  

However, this hydrocarbon price situation has led to an accelerated economic boost to countries in the North African and Middle East region.  

For Saudi Arabia, according to the National News, "every ten-dollar increase in the price of a barrel of oil" will increase its GDP by 0.5 per cent. 

However, Kuwait will benefit the most from this increase in the value of oil, and Bahrain will be the least favoured, according to Saliba. He also said that, in the case of gas, Qatar will position itself as a clear "winner" along with Egypt in providing this hydrocarbon to the EU.  

In addition, the latest news in geopolitics must be taken into account, as the talks between Tehran and Washington on the return of the US to the 2015 nuclear deal may affect this economic momentum.    

The Gulf countries have long relied on hydrocarbon sales to boost their revenues. However, the various governments in the area have made numerous economic transformations in recent years.   

Saliba said that this opportunity for these countries will help speed up these transformations. For example, Saudi Arabia will be able to direct these windfall profits to the country's Public Investment Fund, and use it to plug the holes caused by the financing of the mega-projects scheduled in the Vision 2030 agenda.  

In the case of the UAE, this surplus has boosted its medium-term outlook. Although the country's budget continues to finance projects related to hydrocarbon extraction, the government is aiming for fiscal balance by 2024.