17/08/2025
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17/08/2025
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The once-famous statement of the U.S. administration urging American oil companies to ramp up drilling and search for more crude oil has now taken a turn. Today, U.S. oil producers are singing a different tune - “Baby, Wait”, as oil prices have dropped so low that they no longer cover production costs.
The aim may also be to compensate for revenue losses incurred over the past three years. Most OPEC+ members are currently facing budget deficits and are in urgent need of cash to bridge financial gaps. With rising annual budget expenditures, new hires, and job creation initiatives, many of these countries require oil prices of $90 or higher to balance their budgets.
The challenge of the future, which, in fact, is already upon us, is how to improve our oil revenues while trying to avoid or even reduce annual expenses, despite rising state costs. Meeting these additional expenses requires a dedicated team with clear vision and foresight.
Here in Kuwait, we must address both our current and future challenges. Oil resources will not last forever, and even if they did, relying solely on oil will leave us short of cash unless we actively seek new sources of income beyond total oil dependency. Perhaps the biggest challenge would be to create meaningful job opportunities for our upcoming graduates from all levels.
This cannot be achieved without a serious, coordinated effort from the government and full cooperation with the Kuwait Chamber of Commerce and Industry. Together, they must manage and coordinate the arrival of different nationalities into our country, especially following the recent decision of the Ministry of Interior to allow almost all nationalities to enter Kuwait with minimal restrictions. This move hopefully signals greater openness and expanding business opportunities for the future. Perhaps this will lead to prosperity and more job opportunities, hopefully welcoming newcomers along with their families. It is certainly a positive move that could pave the way for prosperity for all.
Oil prices, however, are expected to take a long time to recover and reach the $70-per-barrel level, which is bad news for all oil producers, including U.S. shale producers. The recovery will be slow due to weak or sluggish demand from major consumers such as China, India, and Brazil. At this moment, it is not economically viable to drill for more oil when the prices are hovering around $66 per barrel. This does not make any economic sense to the U.S. shale producers, as they are not covering their annual expenses with the current low prices, and this situation may last for a while.
Borrowing from international banks is an option, but the question remains - for how long? Meanwhile, we in Kuwait might continue selling our overseas assets, the so-called “future generations reserves”, unless oil prices return to their previous high levels, which would likely come at the expense of giving up OPEC+ market share while maintaining the “drill baby drill” policy.
