The generous social benefits being doled out by Saudi Arabia and other oil-rich Persian Gulf nations are contributing to high oil prices, according to a report by the energy advisory firm, PFC Energy.
The report said that populist spending programs, which have recently become even more generous in an effort to ward off the social unrest that has swept much of the Middle East, are forcing some Arab OPEC countries to keep oil prices high to pay for generous social policies.
Such policies include high government salaries, direct payments to citizens, “payoffs” to the religious establishment, housing allowances, and large subsidies to keep gasoline prices low. “Today’s high oil prices facilitate the financing of the expansive spending packages that [Saudi] King Abdullah has recently announced to prevent outbreaks of popular unrest within the country,” said the report, prepared for the firm’s private clients.
PFC Energy also cited the countries of the United Arab Emirates as funding growing social largesse with oil revenues. The report said increases in government spending among OPEC countries makes it unlikely that the oil cartel will allow oil prices to dip below $90 per barrel in the future.
Article appearing courtesy Yale Environment 360.