How COVID-19 will change GCC labor markets
A siren is blaring for local labor markets as the global pandemic and falling oil revenues begin to upend the Gulf states' economies.
If the late 2014 decline in oil prices and subsequent hit to GCC fiscal revenues is any guide to the current oil glut, the signal now to Gulf labor markets is a siren. When oil revenues declined sharply in late 2014, the structural fundamentals were similar to what OPEC+ members thought they saw in early March 2020. They saw declining demand in China and persistent supply from US producers. OPEC, with new partners like Russia and Mexico (the "plus"), responded in late 2016 with production cuts that held prices steady in the range of $50-70 per barrel until the agreement fell apart on March 5.
Since then, oil prices have been in free fall, reaching under $20 per barrel, as Saudi Arabia committed to expand production and flood markets with product. Barring some unlikely cooperation that would require private firms across the United States and Europe to agree to trust Russian oil producers and the Saudi government, oil producers are bracing for impact. What is profoundly different from the price volatility five years ago, and what the Saudis and Russians surely could not have fully foreseen, is the demand destruction from the novel coronavirus pandemic that has wreaked havoc on the largest economies in the world.
