PM’s Advisor identifies two main reasons for the drop in oil prices, its impact on the budget

 
Baghdad-INA
 
 
The financial advisor to the Prime Minister, Mazhar Muhammad Salih, identified on Saturday,  two main reasons for the decline in global oil prices, while stressing that the decline in oil prices may raise the budget deficit to record levels.

"The world's oil market indices show that the oil asset cycle is trending downward, creating semi-deflationary price effects on two things. The first: "There is a high economic stagnation in industrialized countries, bank collapses affecting western economies, a clear decline in economic growth rates and a contraction in aggregate demand, particularly in energy-importing and energy-consuming western economies, affecting the growth of demand for crude oil in energy markets," Saleh told the Iraqi News Agency (INA).

He added, " "The second effect is that Russian Federation, as a party to war with the West, has begun to market its oil to the markets of India, China and Asia at $20 less than world oil prices, which is a pattern of an undeclared price war."

He pointed out, "The two factors constitute signs of an oil glut that may lead to a return of oil prices in the current year to an average between 60-65 dollars a barrel, which may prompt the Organization of Petroleum Exporting Countries or the (OPEC Plus) group to maintain the stability of their countries' budgets by reducing some of the production according to the quotas of the members, but the OPEC Plus decision may contradict the hypothetical ceiling for oil prices adopted by the Western economies from the parties to the war in Ukraine and energy consumers, specifically (NATO countries) that implicitly want to load part of the war bill on the oil-exporting countries and devour their surpluses from oil revenues.”

Regarding the possibility of a decrease in oil prices and its impact on the general budget, Saleh stressed that "the draft federal budget law for the year 2023, which was approved by the Council of Ministers in the past few days, was submitted for legislation to the parliament, which approved the price of a barrel of oil of 70 dollars in order to evaluate oil revenues in the aforementioned budget, the possibility of oil prices falling below $70 per barrel of Iraqi oil, this will inevitably expand the planned deficit bill in the federal general budget, which is currently estimated at about 63 trillion dinars, and may raise the deficit to other record rates, adding between 8-16 trillion dinars to the balance of the aforementioned deficit in the event that expenditures remain on their current estimated status, especially the average price of a barrel of exported oil is between 60-65 dollars per barrel.