02 May UAE Economy Set to Grow Despite Oil Price Slump
The oil and gas industry, with its history of booms and busts, is currently experiencing its deepest oil prices drop probably since the 1990s. Oil prices have plunged, with the price of a barrel of oil, dipping by over 70 percent compared with June 2014 levels. While the price recently jumped to over $45 a barrel, this is still below what producers need to drill profitable wells. Experts reckon it will be years before oil prices returns to $100 a barrel, a value that was pretty much standard over the last decade.
The aftermath of the oil price drop has hit employment in the UAE’s oil and gas sectors, with recent data estimates revealing that the country’s expat workforce has declined by 9 percent compared with last year.
It’s down to simple economics.
- United States’ domestic oil and gas production has nearly doubled over the last several years. So, oil from Saudi Arabia and African countries such as Nigeria and Algeria that was sold in America is now competing for Asian markets, driving producers to drop prices.
- Canadian and Iraqi oil production and exports are rising.
- Oil production is itself falling because of the decline in exploration investments.
- The demand for oil in several countries in Europe and developing countries is lagging a bit with vehicles becoming more energy-efficient, although there seem to be signs that demand is rising in America.
Amidst falling oil price, is this still a good time for company formation in the UAE?
Yes. Here’s why.
- While it’s no secret that the oil prices drop has slowed down growth, the UAE’s economy is forecast to grow this year. This is down to the country’s several resilient economic policies that have pushed diversification and decreased reliance on oil. At present, the non-oil sector’s contribution to the UAE’s GDP stands at about 69 percent.
- The total volume of UAE foreign investments have exceeded $100 billion in the last decade. With numerous multi-speciality free zones, complete foreign ownership has now been made possible with zero tax rates and a 100 percent profit transfer.
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