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Crude oil prices peaked at $130 per barrel last week as Russian troops keep pounding Ukraine and turn a blind eye to the international community’s plea to stop the invasion. 

The Russian invasion of Ukraine is driving energy prices up and as an oil producer, Oman could well see a record budget surplus this year to give its economy a huge boost to wipe out the predicted 2022 deficit.

With US President Joe Biden calling for sanctions against Russian crude oil exports joined by European countries such as the UK, Germany and France, oil producers, including the Sultanate, are set to hugely benefit from it.

In the 2022 fiscal budget, Oman forecast a 1.55 billion rial deficit, a 27 per cent increase from the actual 1.2 billion rial deficit for 2021.

Crude oil prices peaked at $130 per barrel last week as Russian troops keep pounding Ukraine and turn a blind eye to the international community’s plea to stop the invasion. Oil analysts are already predicting the crude oil prices could touch $150 per barrel in March and that could signal an economic disaster for oil reliant economies.

But Oman, with an average production of about 970,000 barrels a day, this means that the Sultanate could well post an annual surplus this year for the first time in a decade.

“It is good news for Omani economy with oil prices above $100 threshold, especially the budget is estimated only half of that. The extra revenue will give the economy the push to cover all its expenditures and open up more employment opportunities this year,” Hafidh Al-Raqadi, a retired economist at the ministry of Energy and Minerals, said.

Considering that Oman based its 2022 budget at an oil price of $50 per barrel, the windfalls, if the oil prices stay on the high side for at least another quarter, may well exceed $100 over the predicted price range of oil based for this year’s budget. Oman also predicted a 2022 revenue of 10.6 billion rials and with higher oil prices so far this year, the state income may double up and to reach 20 billion rials.

It will be a boost for the country’s financial reserves, currently estimated at around $15 billion. The good news is that the government will also comfortably execute all of its planned major projects this year. But most importantly, there will be plenty of cash to create jobs to employ thousands of graduates waiting for employment. The extra cash will also improve business environment and stimulate investments in the country.

Oman may well see itself ramping up more crude productions, alongside other oil producers, to overcome the shortage of the commodity in the market if Russia’s crude exports continue to be under sanctions.

But hopefully, the benefits of higher oil prices may not offset the hike in food prices expected with the continuing Russia’s aggression towards Ukraine and Oman may find a way to counterbalance inflations.

But how much oil producers like Oman stand to benefit from higher oil prices depend on how long Russia’s offence on Ukraine lasts. But the international sanctions on Russian crude oil may continue for some months even if Moscow decides to pull back in the near future.

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