Combined oil revenues for GCC producers are projected to surge to a record US$562 billion (Dh2.06 trillion) this year, a 71 per cent increase from the previous record set last year, due to high oil prices and output. According to new data from the Centre for Global Energy Studies (CGES), an analysis group in London, UAE oil revenues will scale a new peak of $97bn, while Saudi Arabia will rake in $307bn this year. Leo Drollas, the centre's deputy manager, said the latest revenue forecast assumes an average 2008 Opec basket oil price of $110.80 a barrel, up from about $69 a barrel last year, according to WAM, the official UAE news agency. The new revenue projections, however, are slightly below those that the CGES forecast about a month ago, when oil prices were even higher than at present. The earlier forecast was based on an average Opec basket price of $115 a barrel, said Muhammad-Ali Zainy, the group's senior energy economist and analyst. The new CGES figures project a 70 per cent increase in total Opec revenue to $1.014tn this year from $598bn last year. Mr Drollas predicted the 13-nation group would pump an average 32.6 million barrels per day (bpd) of oil this year, up from 30.7 million bpd last year. "For the region, this is a lot of money, and a lot more than their annual government budgets," Mr Zainy said. The resulting budgetary surpluses would allow GCC countries to increase their foreign reserves, beef up sovereign wealth funds, invest in domestic infrastructure and overseas assets, and pay down national debts. But the downside, he said, was that large government surpluses would increase the money supply in GCC countries, helping to fuel "double-digit inflation". Last year, inflation in the UAE reached a 20-year high of 11.1 per cent. The Ministry of Economy has set a target of reducing inflation this year, but Abu Dhabi's Department of Planning and Economy has estimated that this year's inflation rate has already surpassed 12 per cent. High oil prices fuel inflation in the Gulf region, mainly because the currencies of most GCC countries are pegged to the US dollar, in which oil prices are denominated. High prices for oil, of which the US is the world's biggest consumer, have helped weaken the dollar substantially against most other major currencies. For countries like the UAE, which export oil but are heavily dependent on imports in most other areas, including food, the cost of imports has consequently soared, driving up inflation.
tcarlisle@thenational.ae