•By Samia Badih, Staff Reporter
Oil flow is monitored at a pumping station at Iraq's Rumaila oil field near the southeastern city of Basra. In the Gulf countries oil exports are the key to infrastructure development and the creation of jobs.Image Credit: APDubai: A $1 increase in crude oil prices translates into $2.2 million additional income per day for the UAE or $803 million per annum.
With crude prices flirting around $85 per barrel, the UAE can count on a hefty $187 million income per day from oil, with its 2.2 million barrel daily production.
The UAE has a production capacity of more than three million barrels per day.
But production is held at 2.2 million bpd under the quotas agreed by the Organisation of Petroleum Exporting Countries (Opec) to help push up prices.
Hamad Bu Amim, Director General of the Dubai Chamber of Commerce and Industry, told Gulf News that the current crude oil prices are "excellent" and will help boost the UAE's economy.
Crude oil prices yesterday were slightly higher than $85 per barrel.
"We think that the level of $70 to $90, anything around this range is acceptable," he said.
Pries fell from a high of $147 per barrel in July 2008 to around $32 per barrel in March 2009. However, since then they have bounced back, hitting $80 per barrel.
Higher prices would translate into more investments in infrastructure and government services, Bu Amim said.
"Over the last year, oil prices have almost doubled and this is very important for the UAE's economy," he said.
"They [oil revenues] support the rest of the economy because the GCC and the UAE government use the revenues from the oil to invest in infrastructure," he said.
Support
"They will continue supporting the UAE and GCC economies as they recover from the financial crisis, and the governments are using these revenues and are investing in infrastructure and government services," he said.
According to a recent oil market report released by the Dubai Chamber, the recent spikes in crude oil prices have helped cushion the impact of the economic downturn in the UAE.
The report said that "high hydrocarbon revenues will allow the UAE to continue with its large-scale fiscal investments which will reignite aggregate demand and bolster the creation of new job opportunities."
According to the US Energy Information Administration's short-term energy and summer fuels outlook report which was published last month, West Texas Intermediate (WTI) prices are expected to average around $85 per barrel by the fourth quarter of 2011.
The Abu Dhabi National Oil Company (Adnoc), one of the world's top ten oil producers, produces over two million barrels per day.
An increase of $1 in oil prices corresponds to more than $2 million per day, assuming that production costs remain constant.
"However, the minute it goes to $100, it will hurt the global economy and we'll see that affect inflation rates," Bu Amim said.
"We've seen from the old days how the pressure from inflation affects everyone by the end of the day."
Kate Dourian, Middle East Editor at Platts, an energy and metal information provider, said that higher oil prices don't seem to be affecting the inflation rates in the advanced economies because the share of energy in them is shrinking.
"It's obvious that no one wants oil prices to go to an extent that would hurt the recovery or that would push up inflation," she said.
"Everyone's saying between $75 and $85 is a good level."
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