Page 49 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

34 PART I Background and Context

FIGURE 1.4

Breakeven Oil Prices in the Gulf Vary Widely

Qatar

UAE

Kuwait

Saudi Arabia

Oman

Bahrain

0 20 40 60 80 100
Oil Price ($ per Barrel, 2009)

Source: CMBC, “Which Oil Producers Are Making Money?” October 2008.

The breakeven imperative” of GCC states highlights the heavy
reliance of Gulf governments on natural resource income for public-
sector revenue. Unlike some other oil exporters, such as Norway, Gulf
governments rely primarily on oil and gas income as their main source
of funding. Taxation—the key lever that governments typically use to
manage their incomes—is nonexistent or minimal in GCC member
states. Gulf governments, at present, are missing some of the tools for
managing their public-sector incomes that are available elsewhere.
Greater diversification of government revenues beyond oil and gas
income could, over time, significantly change the Gulf states’ reliance on
energy markets to meet their breakeven imperative. Today, however,
governments’ breakeven points are best defined in terms of oil prices.

ILLUSTRATION: DUBAI’S DIVERSE INCOME
Dubai’s economic development and deregulation strategies, in addi-
tion to diversifying the emirate’s overall economy, have greatly diver-
sified its sources of government income. These strategies were, in a