Oil Prices Decline... And What About Job Opportunities?

The decline in oil prices is attributed to the reduced intensity of US threats against Iran, the absence of renewed hostilities, and the continuation of ongoing negotiations. The primary driver may be the outcome of the US elections, specifically the Republican Party’s loss of its majority in both chambers of Congress. Consequently, any legislative initiative by the current administration now requires Democratic approval, forcing the administration to make concessions. This has led to the collapse of the threat and fear factor regarding a potential war in the Gulf region, and a return to negotiations without the threat of military force.

As a result, oil prices have fallen below $100, with the price of a barrel of Kuwaiti crude reaching $99. However, this remains above the current break-even price. We must wait until the end of next March to see the final results of Kuwait’s fiscal year ending in March 2027.

The pressing question is: What measures should be taken to address Kuwait’s fiscal deficit? Is there a mechanism to cover this persistent deficit without resorting to annual borrowing? For instance, could Kuwait borrow over the next five years at lower interest rates instead of engaging in annual borrowing? Alternatively, could other mechanisms be employed instead of approaching global banks annually? Is borrowing preferable to utilizing the annual returns from sovereign wealth funds? The answer may lie in using these returns and reinvesting them in other funds. Ultimately, the decision will inevitably be the one that is cheapest and most beneficial for Kuwait.

An answer may be found, but there are critical questions that require explanation. Kuwait has always been transparent in this regard, possessing expertise and seasoned professionals within its oldest sovereign wealth fund. Other advanced nations, such as Norway, which strictly limits the use of sovereign wealth fund returns, could learn from Kuwait’s experience. It may be preferable to reinvest these returns into the sovereign wealth fund, specifically the “Future Generations Fund,” thereby preserving the fund for future generations.

However, this depends on our future expectations for oil prices, assuming they maintain their current growth rate and continue to rise. We have long been accustomed to higher per-barrel prices, and we may not be satisfied with a rate of $100 per barrel in the future, or even next year, especially given the growing population and the need to create future employment opportunities for our graduates.

For example, some of our graduates could be employed in companies in which the state holds stakes across various parts of the world. We do not believe these companies would object; rather, they might welcome such appointments and leverage them to sustain Kuwait’s investments in these firms, with the possibility of Kuwait increasing its stakes as well.

We are in dire need of foreign expertise and the integration of our youth into these sectors, without imposing any additional burden or economic costs on the state. The applicants possess the required qualifications, and their acceptance and approval would come directly from the companies themselves. In this way, Kuwaiti youth would gain experience in distinguished firms, yielding long-term benefits for the state.

Returning to our question regarding the decline of oil prices below the $100 mark: this scenario is plausible given the absence of war threats and the oil surpluses available in most oil-producing countries without exception.

To create job opportunities, it is essential to encourage increased economic growth, thereby sustaining global demand above the current rate of approximately 103 million barrels per day.

Forecasts indicate that global demand will decline by approximately 2.5 million barrels by the end of this year, due to rising prices of petroleum products and derivatives, higher shipping costs, the imposition of a value-added tax amid risks, a sharp drop in global demand for petrochemical feedstocks, and reduced demand for diesel fuel for transportation. Consequently, global oil demand is expected to decline.