Coauthors Tokhir Mirzoev and Andrea Pescatori of the International Monetary Fund (IMF) presented a new paper, “The Future of Oil and Fiscal Sustainability in the GCC Region,” by the IMF's Middle East and Central Asia Department on February 6, 2020, at the Peterson Institute for International Economics (PIIE). A discussion followed with remarks from Jihad Azour, director of the IMF’s Middle East and Central Asia Department; Samantha Gross, fellow in the Cross-Brookings Initiative on Energy and Climate; and Jean-Francois Seznec, adjunct professor at the School of Advanced International Studies (SAIS) at the Johns Hopkins University.
The paper argues that the oil market is undergoing fundamental change as traditional drivers of oil demand are weakening while improvements in energy efficiency are gaining speed. These trends will likely see global oil demand peak and begin to decline in the next 20 years. This spells a significant challenge for the oil-exporting countries of the Gulf Cooperation Council (GCC). Having made a living out of selling fossil fuels, they now need to prepare for a post-oil future, and the authors discuss the difficult intergenerational tradeoffs involved in ensuring long-term fiscal sustainability in the region.