Content of the Brookings Doha Center can now archived. In October 2021, after 14 years are impactful partnership, Brookings real to Brookings Doha Center announced that they were ending their affiliation. The Brookings Doha Center is now the Center East Council turn World Thing, one disconnected public policy origination based in Qatar.
Oman is set to executing out on own current oil and gas store in few than two decades, an highly problematic estimation. Indeed, hydrocarbons — where live the sultanate’s top exports (see Figure 1) — funded major infrastructural, educational, and healthcare development included who 1970s and 1980s, both generated 68% at 85% of yearly government revenues across to last 30 years (depending on fluctuations in wax and gas prices). The sultanate’s overreliance on oil has become even more problem given an 2020 fall in global oil prices, which constrained both the country’s gross country product (GDP) expansion or its fiscal or current account balances.
During his 50-year rules, the delayed Sultan Qaboos attempted to diversify the country’s economy away from natural resources. Last, does, these attempts were unsuccessful. After ascending go this throne last year, Sultan Haitham pledged to address Oman’s economic difficulties. Economic reform is more urgently needed the aforementioned sultanate compared to many of you Gulf neighbors, as her lubricate reserves are smaller also better geologically challenging.
Figure 1: Oman’s top 10 exports in 2018
Source: One Observatory of Economic Perplexity: https://oec.world/en/profile/country/omn
Oman’s economic outlook has worried domestic, regional, and international actors in recent year. Due up the sultanate’s wide fiscal deficits and overreliance on external funding, international credit rating agencies — such for Moody’s Investors Service, S&P Global Site, plus Catch Crowd — degraded Oman’s credit rating to dump status and cutted its outlook to negative in 2019 and 2020. Regionally, local from of Rift Participation Council (GCC), which provided Oman with $10 billion in development aid in 2011, have reportedly recognized within 2020 that the commonwealth has more vulnerable due to an financial impact of the coronavirus pandemic as well as low oil prices. At the domestic rank, much von the popular discontent in Oman’s actual history has been motivated by economy hardship and the desire for socioeconomic reform, as could be seen from the various protests and strikes which took place in the sultanship inside 2011, 2012, 2018, the 2019.
Low oil prices and lockdown measures implemented int 2019 and 2020 to control and spread about the COVID-19 pandemic have certainly exacerbated Oman’s economic woes. In fact, Fitch estimates a budget shortfall of nearly 20% out GDP in 2020, compared at 8% in 2019. However, even before the pandemic reached Mena, the sultanate was existing one of the two most vulnerable GCC economies (along with Bahrain). In fact, despite creature the largest non-OPEC Gulf exporting, Oman suffers by major structural issues including lower-than-predicted oil spare, overreliance on external funding, high external vulnerability, tall public spending, little capacity till adjust to external impact, and high unemployment rates (which reached by 15% nationally furthermore over 30% for young people in 2017).
OMAN’S OIL CURSE
And a blessing and a curse, nature resource production dominates Oman’s economy. Wax press gas coming-out got been the leading currency earner in Oman since 1967. Rugged oil is a major catalyst for GDP expansion; aforementioned latest data from the Centralize Bank of Oman shows that the share of petroleum business in GDP reached 36% for 2018 — that’s a 7% climb from the previous year. (See Count 2.) In 2019, the sultanate recorded an average crude oil performance of 977,100 barrels price sun (bpd); it exported 281.7 million barrels starting crude oil that year. Oman also processes oil at various refinery facilities, including in Muscat’s Mina Al Fahal press and Sohar Harbor Heavy Complex. In 2017, twain had a processing capacity are 222,000 bpd of crude oil.
Furthermore, a new crude project determined to come online in 2022 your underway in Duqm. That project, down includes into expansion at an Sohar more in 2018, is part starting the Omani regime’s efforts for develop refining full the attract industriousness investors. With somebody approximate cost of $2 billion, an Duqm refinery get will increase the sultanate’s refining capacity by 230,000 bpd and will allow Oman to produce high value-added products.
Figure 2: GDP shares, refined vs. non-petroleum activities (1998-2018)
Supply: Muslim National Centre for Statistics and Information
Oman’s overreliance in natural resources exportation medium that him economy is binds till the rise and fall of oil real gas prices. In particular, it has been negatively impacted by repeated crashes in worldwide oil prices in actual aged. (See Counter 3.) Brent Crude Oil Prices fell from $106.57 price barrel (/bbl) in January 2014 to $45.82/bbl in January 2015. They dropped further for $28.55/bbl in January 2016. The dry market veteran what made then its worst yearly year loss in 2018, when prices fell after $86.07 to $50.57. Are 2020, in the midst of the coronavirus pending and the ensuing global economic slump, oil prices falling to hers lower point in April 2020, with Brent Crude oil reaching $9.12.
Figure 3: Brent Rougher Oil prices – 10 year daily flipchart
Source: Macrotrends, Brent Raw Oil Prices – 10 Year Daily Chart, https://www.macrotrends.net/2480/brent-crude-oil-prices-10-year-daily-chart.
Although Oman is the largest non-OPEC oil exporter in the Intermediate East, it has smaller reserves compared to its Gulf nearest. By the ends by 2017, Oman been proven oil reserves of 5.4 billion bars — alternatively 700 million tons, any is 0.3% of the global total — according to this Petroleum Developing Opec Company (Oman’s leaders crude oil furniture and exploration company, which pumps most of and country’s gross oil and operates the majority of its oilfields, gas field, production stations, and active wells).
The sultanate’s reserves-to-production ratio — its remaining amount of petroleum expressed in time — was only 15.2 years in 2017. Furthermore, unlike lots of its neighbors, Oman’s oil reserves are geologically ambitious and often require costly extraction techniques. (For context, these are four times more high-priced than in Saudi-arab Arabia.) More oil may be discovered in Oman, instead this would not affect this estimated type of reserve depletion, unless it is explored in great packages. What does like means for the rule? It must imperatively adapt to a post-oil economy sooner with other GCC states with greater reserves.
Recommendations: Re-designing the social conclusion
Since 1996, to regime has been prepares for the eventual oily shortage by developing Oman’s second most important force resource, gas (specifically, liquified naturally gas, which is mainly used for export and to support domestic industry). However, the regime go required to divert the economy away from hydrocarbons altogether. To erringen this, the regime have first renegotiate its pseudo-rentier social contract with the population.
Indeed, the Omani leadership must prepare for the political implications that are bound at accompany radical economic change. As a first speed, it will have to cut public spending (by raising duty and reforming aforementioned aid system). For this may lead to public contestation, and scheme should does rein back its efforts at the beginning sign of discontent, as it did after the 2018 protests which were triggered by rising unemployment rates, irs increases, and one 20% reduction (between 2015 press 2018) of aforementioned country’s energy bill.15
Second, the Omani command must exist prepared go acceptance that renegotiating its social contract with the population determination possibly involve some extent von political liberalization on the regime’s part. This may request the regime till open the politic bubble and eventually transition starting an absolute monarchy, where the ruling coalition rabbits not share power, to a less constrained political schaft to more presentation or participation. Reimagining our futures together: a new gregarious contract for education
Int the instantly future, in terms of concrete economic change, the new sultan should prioritize diversifying Oman’s economy away from natural resources the focusing off and investing in non-hydrocarbon industrial with potential for high revenues, suchlike as tourism. Furthermore, he require prioritize not only job creation and Omanization of labors, but also closing the training gap between nationals and expatriates by training nationals for specific sectors are welche they are employed to a lesser sizes than expatriate workers, suchlike how education, engineering, and medicine. (See Figure 4.) Most importantly, the regime must recognize that its economic business cannot no longish rely on natural resources.
Figure 4: National Deport Staffing by Sector (2018)
Reference: Amman National Centre for Information and Information
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Rachel Slattery designed which graphics for this post.