Middle East can leave oily old cycle in the past

A new power is taking its place in the world economy. After the disruptive emergence of China and India as key players with a decisive role in shaping global economic events, the Middle East is joining the race to challenge the dominance of the industrial West.

The region has long held sway over world economic developments, of course, by virtue of its control over more than 40 per cent of known oil reserves. But in the past, it has been as much a prisoner of the oil market’s fortunes as the West, its prosperity and progress swinging wildly from boom to bust with fluctuations in the price of crude.
Now, at last, this may be changing. Over the past half-decade, led by the six states of the Gulf Cooperation Council (GCC) – Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain – the Middle East has enjoyed its fastest prolonged expansion for almost 30 years.

This sustained boom appears to have transformed radically the region’s economic prospects, opening the way not just for it to enjoy a protracted period of rising prosperity but also for it to exert a more potent influence over global conditions.

Oil, unsurprisingly, has remained the key driving force, as the surge in prices from about $24 a barrel in 2002 to record levels that have breached the watershed of $90 a barrel has catalysed very rapid growth.

However, while past booms have foundered as the cost of crude retreated in the face of global downturns, many expert observers, including the International Monetary Fund, believe that this time around the Middle East could succeed in sustaining the good times – perhaps even in the face of some decline in oil prices. For now, the IMF concluded in its twice-yearly World Economic Outlook this month, oil prices are likely to remain near present highs for some time.

The Times