Warning that oil will stay low for two years

Muscat: A warning that oil prices will stay low for 'next year or two' has been issued by the chief economist of a global investment house while in Oman.
Read also: ‘If oil prices remain low it will affect business in Oman’
With oil prices plummeting globally over the past year the Sultanate's finances have taken a hammering, forcing the government to embrace austerity measures such as freezing some employee benefits in state-run companies and increasing fuel prices.
Get your essential daily briefing delivered direct to your email inbox with our e-newsletter
Fees for government services have increased, and more increases are likely, while Income Tax for companies based in Oman is to be raised, and the Sultanate is moving towards introducing Value Added Tax (VAT) on goods for sale, along with other Gulf countries, in 2018 or 2019.
Earlier this week Oman’s Minister of Oil and Gas Dr Mohammed bin Hamad Al Rumhy said he hoped crude oil prices could recover by the end of this year if a meeting of Opec and non-Opec members scheduled to take place in Qatari capital Doha next month decides to freeze output.
Stay ahead of the rest and download our free WhatsNews app for Apple, Android or Blackberry
However, speaking on the sidelines of the Co-investment Roundtable of Sovereign and Pension Funds (CROSAPF) Working Committee here in Oman on Tuesday, John Greenwood, chief economist of Invesco, which represents hundreds of clients in 20 countries around the globe, said: “It is very hard to see the oil price picking up in the next year or two; it will take longer than we thought.”
“Excess supply and weak demand is the current issue faced by the global market,” he added.
He pointed out that there are four methods to cope with the current issues in the market. “The main thing is to cut the expenditure and it will help us to save a lot; it may include some projects as well,” Greenwood said.
The second method is to raise the revenues of the government.
“It is not necessary to raise the taxes but the government can increase the rates of electricity, water and gasoline,” Greenwood said.
“Other methods to overcome this crisis are to sell assets and borrowing,” he added.
He said that all the Gulf states were moving to adopt many of these methods over the next two years to overcome this crisis period.
The economist presented a topic on the outline of the major economic drivers and risk factors that the investors should be aware of and the investment opportunities.
CROSAPF members are sovereign wealth and pension funds from around the world. It brings together investment professionals of public funds for presentations and in-depth discussions on global trends and recent issues related to investing.
Participants of the two-day conference were welcomed by His Highness Sayyid Kamil bin Fahad Al Said, assistant secretary general of the Deputy Prime Minister’s Office for Cabinet.
According to majority of the officials and participants, it is a good platform to get in touch with more than 100 investment specialist from all over the world and to exchange ideas. “It is an opportunity to exchange knowledge and introduce the investment opportunities in their respective countries to co invest,” a participant said.
Many other participants said the conference helps the Sultanate to showcase and invite the global investors to participate in its upcoming development projects.
In the meeting, the sovereign and investment funds discussed a range of issues and the factors that may play a role in making investment decisions, including global trends and socio-economic variables that affect the investments in short- and long-term strategies.
First day of the conference discussed topics like Next Generation Investor, Co investment collaboration platforms, and Venture Capital: inventing in Innovation.
Mohammed Al Ardhi, the executive chairman of Investcorp and chairman of the National Bank of Oman, said the Sultanate has a lot of opportunities in investment.
“Government is diversifying its activities to different sectors like tourism, logistics, port operations, etc and government is focusing more on the future,” Al Ardhi said.
The CROSAPF Working Committee meeting concluded on Tuesday and the delegates will take part in the Oman Economic Forum, which begins on Wednesday at the Shangri-La Barr al Jissah Resort and Spa in Muscat.