|Last week, the price of Kuwait’s export crude oil reached $40 per barrel in Mina Ahmadi for the first time after the Brent crude oil reached its highest level of $47 more than a year ago. Oil prices are going to stabilize and hit the $50 level hopefully by the end of this year.|
The question now is about our economy. With oil prices at or below $40 per barrel, we will be facing deficit in our annual budget for the second consecutive year as well as in the coming three years because our expenditures are more than our annual oil revenues, which should ideally be within the range of $65-$70 per barrel. However, this is unachievable in the coming years especially since the government is doing nothing to remedy the current situation. In this case, we will end up depleting our monetary reserves within the next ten years, if not earlier.
Solutions at hand are difficult but no one cares enough to take the necessary action and correct the situation, even by increasing the costs of electricity and water consumption as well as the motor gasoline prices without facing resistance for no reason. The government seems happy to not implement any of the energy prices mechanisms except on the expatriates.
About 43 percent of the consumers in Kuwait will continue to pay the old rates which are the lowest costs for electricity and water consumption in the world. Kuwait also has the highest per capita consumption of water which is 450 liters while the average per capita consumption of water globally is 85 liters.
Unfortunately, some of our MPs are opposing any changes to the electricity tariffs so that the pockets of citizens are not “touched”. However, they all know quite well that the only thing that will end up being “touched” is the wealth of our future generation — the same wealth that our forefathers had left behind for us to build and keep aside for the coming generations.
Without moving forward, taking the hard way, privatizing some of the governmental sectors including the oil sector and creating jobs outside the governmental institutions, it will be impossible to provide jobs for the new graduates and difficult to appoint them for the sake of providing monthly salaries without expecting any productivity.
Time is running out but nothing seems to be moving forward, not even the oil prices, at the fast pace that we are hoping for. We do not have an oil price level of $70 per barrel currently for balancing our budget and it will certainly not be available in the coming few years. Therefore, all we have left is the fund for the future generations.
By Kamel Al-Harami – Independent Oil Analyst