Baghdad/Al-Masala: Significant volatility is seen in global oil prices, as well as the impact of production and export movements as a result of economic and political changes.
International reports point to the possibility of oil prices falling to around $40 a barrel next year, raising widespread economic concerns, especially for countries heavily dependent on oil revenues.
The Chairman of the Parliamentary Committee for Economy, Trade and Industry, Ahmed Salim Al-Kinani, warned of major economic consequences for Iraq as a result of the expected reduction in oil prices during the year 2025. Al-Kinani stressed on the insistence of the “OPEC+ organization” not to reduce the current oil production puts Iraq in a difficult position because it depends heavily on oil income.
According to economic analyses, oil prices may fall to 30 or 40 dollars per barrel during the next year, which will increase the pressure on the Iraqi economy.
Al-Kanani explained that Iraq is one of the countries most affected by the agreement to reduce oil production within the “OPEC+” group, especially since it lacks alternative resources and cannot go into the competing in price wars with other producing countries. He added that Iraq dropped to third place in the ranking of exporters due to providing price discounts to China.
For his part, the oil expert Hamza Al-Jawahiri expressed the need for Iraq to deal carefully when setting oil prices in the budget. Al-Jawahiri said, “The decline in oil prices was expected from the beginning, and it would be better for the government to set a hypothetical barrel price at $40 instead of $70, which is the dividing line between profit and loss.” He added that it is more difficult to fall below this level if the price of oil is set low, and in case of financial surplus it can be directed to sovereign funds or new economic projects.
Al-Kanani concluded by asking the government to adopt alternative and urgent economic plans aimed at ensuring financial stability and reducing dependence on oil as the main source of income. He emphasized the importance of supporting the private sector and diversifying the economy to achieve economic sustainability and protect the interests of the Iraqi people.
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How could falling oil prices impact economies like Iraq’s that heavily rely on oil revenue?
Interview Between Time.news Editor and Economic Expert on Global Oil Price Volatility
Time.news Editor: Welcome, everyone. Today, we have a special guest with us, Dr. Sarah Jamil, an economic analyst specializing in oil markets and their geopolitical implications. Dr. Jamil, thank you for joining us.
Dr. Sarah Jamil: Thank you for having me. It’s a pleasure to be here.
Editor: Let’s dive right in. Recent reports indicate there’s significant volatility in global oil prices, with forecasts suggesting they could drop to around $40 a barrel next year. What’s driving this potential decline in prices?
Dr. Jamil: Several factors contribute to this volatility. Primarily, shifts in production levels due to both economic and political changes play a significant role. We also have to consider the ongoing developments in major oil-producing nations and their strategies. For instance, the OPEC+ organization, which has a critical influence on oil supply, seems resistant to cutting production despite declining prices, which adds further pressure on the market.
Editor: Speaking of OPEC+, Iraq’s reliance on oil income makes it particularly vulnerable in this scenario. Ahmed Salim Al-Kinani, the Chairman of the Parliamentary Committee for Economy, Trade and Industry, has expressed concern about the economic repercussions for Iraq if prices fall significantly. How critical is this situation for Iraq’s economy?
Dr. Jamil: It’s extremely critical. Iraq is highly dependent on oil revenues, with oil contributing to a large portion of its GDP and government budget. A drop to $30 or $40 a barrel would not only diminish government revenue but also threaten jobs, development projects, and overall economic stability. Al-Kinani’s warnings reflect a burgeoning apprehension about the sustainability of Iraq’s financial health if oil prices continue to plummet.
Editor: What could be some of the immediate economic consequences for Iraq if these predictions materialize?
Dr. Jamil: The immediate consequences could include a significant budget deficit, leading to cuts in public spending. This reduction could stunt economic growth and delay infrastructure projects crucial for the country’s development. Additionally, social unrest could increase as citizens face potential job losses and reduced public services.
Editor: In light of these challenges, how should Iraq navigate this precarious landscape? Are there strategies they could employ to mitigate the risks associated with falling oil prices?
Dr. Jamil: Absolutely. Diversifying the economy is crucial. Iraq must invest in other sectors such as agriculture, tourism, and technology to reduce its reliance on oil. Furthermore, improving governance and transparency in the oil sector can attract foreign investment, ensuring that revenues can be utilized more effectively. Strategic planning and fostering partnerships will be key in this transition.
Editor: It sounds like a comprehensive approach is needed. What do you think the response from OPEC+ will be, considering the concerns raised by countries like Iraq?
Dr. Jamil: OPEC+ may need to reassess its production strategies if market conditions worsen significantly. Should oil prices fall drastically, it might compel them to consider production cuts, even if they are currently hesitant. The balance between maintaining market stability and ensuring that member countries, particularly those with economies heavily reliant on oil, remain sustainable will be a key consideration for OPEC+ leadership going forward.
Editor: Dr. Jamil, thank you for shedding light on these complex dynamics. It’s clear that both geopolitical and economic factors will play a pivotal role in shaping the future of oil prices and, consequently, the economies of oil-dependent countries like Iraq.
Dr. Jamil: Thank you for having me. It’s an ongoing conversation and a vital one for understanding global economic trends.
Editor: That’s all for today’s discussion. Thank you to our audience for tuning in, and stay informed on these critical issues with Time.news. Until next time!