On August 20th 2019, the U.S. “Energy Information Administration” (EIA) released its projections for the oil market. The purpose of their re-publishing is to link them with the need for fiscal reforms in Kuwait after the fiscal policy returned to being uncontrolled with the temporary rise in oil prices in 2018. The “EIA” estimated “OPEC’s” oil revenues in 2018 by US$ 711 billion, up by 32% from its US$ 538 billion in 2017. It dropped its estimated revenues in 2019 to about US$ 604 billion, a 15% loss from 2018 revenue level. The EIA estimates the per capita loss at “OPEC” from oil revenues by about 17% by its decline from about US$ 1,416 in 2018 to about US$ 1,180 in 2019. It estimates “OPEC’s” loss in 2019 at 1.8 million barrels per day, bringing its share of global production to about 30.1 million bpd down from 31.9 million bpd in 2018. Production loss was due to its and its outside partners’ attempts to support the price levels.
This means that oil revenues are declining. Despite “OPEC’s” production reduction, that did not prevent prices from falling as well. This happens despite the sharp drop in major producers’ exports such as Iran and Libya. Countries that rely almost entirely on oil in financing their budgets, such as Kuwait which oil accounts for about 90% in financing its budget, have no choice but to control their expenses. Most importantly, most future oil scenarios are not promising, i.e. 2018 was the exception, while the rule is the continued pressures on oil revenues and downward production whether to lower production cuts to stabilize prices or because of any political breakthrough in Iran or Libya, or even for environmental reasons or technological developments in the production of clean fuel.
If public finances of most oil countries are currently facing deficit and the almost impossible control of supply variables in the oil market, and pessimistic expectations of the future performance of the global economy which will negatively affect the demand side, the only option is to control the only variable you have the ability to affect, i.e. the public expenditures side, both qualitatively and quantitatively, which is not currently happening in Kuwait.