Oman to Tackle Unemployment Problem with Money from Oil Windfall Profits

An unnamed source has revealed that in response to a windfall in oil revenue in Oman over the past six months the Sultanate has decided to spend about $1 billion in additional monies to create jobs for its citizens over the coming year.

"We had a very good income from oil revenues in the first six months of the year," an official from Oman’s planning department told the press. "Not only do we expect to comfortably balance the budget, but we will use $1 billion of that windfall to create jobs in the next 12 months from September."

The official did not detail any specifics of the plan, such as how the money will be spent or whether the jobs will be concentrated in the public or private sector, or both.

Oman, which is not associated with OPEC, revealed at the beginning of August that the government collected 35 percent more in revenue than over the same time last year. The take for the first six months reached $19.1 billion due to the influence of surging oil prices and increased production.

The increase in revenue resulted in a bulge in the government’s budget surplus amounting to 1.61 billion rials, which was four times the surplus of the preceding year.

There is an unemployment problem in Oman which the Sultanate would like to address. According to the manpower ministry there are about 22,000 Omani citizens who are in search of jobs, out of a total of 2 million of employable Omanis.

"About 15,000 graduates are looking for jobs this summer and the rest, from that figure of 22,000, are a backlog of jobless who have not found jobs since the beginning of the year," the official from the manpower ministry said.

The International Monetary Fund, using census data taken in 2010, has estimated the unemployment rate in Oman to be about 24.4 percent. According the IMF Oman will need to create 45,000 new private sector jobs per year to absorb all the new workers emerging each year, and to lower the unemployment rate to a reasonable amount. The IMF admitted that it could also be possible that the number it used for its unemployment figure may also include people who are not looking for jobs.

OPEC Meeting This Week in Vienna

The Organization of Petroleum Exporting Countries is scheduled to meet this week in Vienna. Their task will be to strike a fine balance between setting oil prices just right so that the international economy can continue on its slow and tedious recovery without having to deal with an extra burden of rising oil prices, while at the same time making up for the lack of oil flowing from Libya.

Oil Production Will Stay Steady

Analysts believe that OPEC will be forced to hold the level of oil production steady, with no serious changes on the horizon. OPEC is made up of 12 member nations, and together they produce roughly 40% of the world’s oil supply. The Wednesday meeting will be held in the midst of growing global fears that a significant increase in the price of crude oil will strike a blow at the hesitant international economic recovery which will lead to a decrease in the demand of oil worldwide.

The International Energy Agency (IEA) has requested that OPEC increase oil output and so avoid another harmful rise in prices, taking into consideration that during the coming summer months Northern Hemisphere oil demand will increase.

Rising Oil Prices Blow to Economy

Brent oil prices have risen a startling 21% so far this year, mostly in response to the widespread protests and violence which have occupied much of the past six months in the Middle East and North African region, with a large contribution from Libya, an OPEC member state.

“I would expect OPEC to leave quotas unchanged, rather than raise them, given the growing evidence that global demand is slowing,” said Capital Economics analyst Julian Jessop. “There is speculation in the market that they will be doing something to acknowledge the supply problems in Libya.

“Regardless of what OPEC happens to do — prices have further to fall,” Jessop added, referring to recent economic data showing that one of the world’s most important oil consumers, the United States is having a rough economic time of it and will most likely reduce consumption rather than pay more for the crude.

Libyan Unrest Threatening Oil Supply

As Libya tumbles into the unstable chasm of unrest, protests and violent demonstrations, the fear and uncertainty of such chaos is being felt in the cost of Brent crude oil, which climbed by $1 per barrel on Monday. Libya is a member of OPEC, and was the world’s 12th leading supplier of oil in 2009, and has the largest amount of oil reserves in Africa; according to the US Energy Information Agency there are 44 billion barrels of proven oil reserves there as of January 2010.

The protests are focused on ousting the leader of Libya, Muammar Gaddafi. Protests have spread to Tripoli, Libya’s capital city, where Gadhafi’s son promised to fight against the protestors until “the last man is standing.” His remarks were made in the wake of violent clashes which left scores of protesters dead in Benghazi.

Commenting on what the world can expect from the coming days as far as oil supply is concerned, Tony Nunan, a risk-manager for the Tokyo company Mitsubishi Corp said, "In the short-term there would be a negative impact. There will be chaos and a real concern that supply could be disrupted in Libya. The bigger issue is if it spreads to Saudi Arabia."