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The oil boom brought about by the Ukraine war has made energy-rich Middle Eastern countries extraordinarily wealthy once again. But experts warn that it may be the last such upswing.
The energy price spike triggered by the war lifted the Gulf states out of an almost decade-long economic slump that saw them cut spending and go into budget deficits as their economies shrank. Russia’s invasion of its neighbor shot the value of crude to an eight-year high.
Gulf states went through oil booms in the 1970s and 1980s, and then another in the early 2000s. But changing attitudes toward energy consumption mean that such cycles may no longer be tenable, and Gulf states need to be prepared for it, experts say.
“This is certainly the beginning of the end of oil wealth at this sustained level,” said Karen Young, senior research scholar at Columbia’s Center on Global Energy Policy.
Western states have been working towards renewable energy transitions, which today seem more pressing than ever as the Ukraine war drastically disrupts Europe’s key supply channels for oil and natural gas.
“Today’s boom is different in that it is more than an oil crisis,” said Young. “It is a major shift in the structure of how we meet global energy needs.”
Middle Eastern energy exporters are expected to reap $1.3 trillion in hydrocarbon revenues over four years as a consequence of the current boom, the International Monetary Fund has said. Experts have warned them against wasting it, arguing that Gulf states need to shield themselves from fluctuations in oil prices by using the windfall to diversify their economies away from their dependence on oil riches.
During previous oil booms, Gulf states were seen as squandering their wealth on wasteful and inefficient investments, building sprees and buying weapons, as well as