| Next | Section menu | Main menu | Previous |

The end of a black golden age

Gregg Carlstrom: Middle East correspondent, The Economist, BEIRUT

A moment of reckoning will arrive for oil-dependent Arab states

Demand for oil will stay depressed

FOR DECADES Arab oil producers have been caught in a quandary. When prices fall,
they pledge to wean their economies off the black stuff. But low prices mean they
cannot afford costly reforms. Then output falls, demand climbs and prices begin their
inevitable rebound. Treasuries are once again flush, and the pressure to reform
disappears.

Privately, some officials now wonder if this cycle is over, making the needed reforms
unavoidable. The drop in demand caused by covid-19 sent Brent crude as low as $21 a
barrel in 2020. Prices will recover a bit in 2021, perhaps crossing the $50 mark. They
will not go much higher, though. Most oil states in the Middle East will still be unable to
balance their budgets.

Saudi Arabia, the region’s biggest producer, will push on with its search for non-oil
revenue. Last year it tripled value-added tax to 15%. Saudis who hoped the rise was