Economic Downturn In The Gulf States

As indicated by the photo taken last spring when OPEC was holding the West over the oil barrel (Note the smug expressions), the oil sheikhs were swaggering around and bragging that the financial crisis couldn't affect them. Apparently, their braggadoccio has turned out to be premature.

From the October 9, 2008, Washington Post article "Gulf States Lose Their Swagger Amid Regionwide Sell-Off":

CAIRO, Oct. 9 -- The oil-rich princes and financial titans of the Persian Gulf went into the week touting their immunity from the financial turmoil of the West, but stock markets in the region ended it posting sharp losses.

Stocks in Dubai, the boomtown of the Gulf, shed nearly a quarter of their value in four days of trading. Saudi Arabia's market, the largest in the Arab world, lost more than 17 percent. In all, the region's seven stock markets by Thursday had lost more than $160 billion in market capital, cutting their value to about $770 billion.

The lessons for Gulf oil states: Billions of dollars in oil surpluses may not be enough to fend off a global recession....

...In the United Arab Emirates, the market value of firms in the banking and real estate sectors dropped about 40 percent.

And oil investment may not be so financially safe after all:

Global demand for oil plummeted this week. After hitting a record $147 in July, the price of oil fell to less than $88 a barrel Thursday.

Some producers within the Organization of Petroleum Exporting Countries are pushing the cartel to set and defend a minimum price of $80 a barrel.

For the Gulf, oil is "the main thing," said Carl Delfeld, head of the U.S.-based Chartwell Partners investment advisers.

"Foreign investors were banking on that oil revenue . . . to spur property markets and overall economies of these countries," Delfeld said. "And it's going in reverse now."

[...]

Even before this week's crash, investment firms were calling Dubai's high-end property market overbuilt and warning of a 10 percent to 20 percent drop in real estate prices over two years. "I wouldn't say it's the bottom yet," said Vyas Jayabhanu, a Dubai stockbroker.

OPEC gouged the West earlier this year with the run-up in the price of oil. Perhaps, however, OPEC did all of us a favor, albeit unwittingly. For my own part, I've learned to cut back on my driving and not to floor the accelerator. I can now drive for an entire month on one tank of gasoline, even in a big eight-cylinder vehicle! Mr. AOW and I didn't even take our end-of-the-summer road trip because we refused to pay the outrageous price for the fuel required to hit the road. Here at our house, we had thermal windows installed last March; those windows cut our summer's electrical in half.

Yesterday, for the first time in decades, a large discount-furniture store here in the Washington area advertised a ten percent discount for cash. This measure indicates both the instability of the credit system and the possibility of savvy consumers obtaining bargains. In spite of the financial crisis, all is not doom and gloom. Furthermore, we don't have to be "big players" to find at least some small advantages right now.

Nobody, not even the so-called financial wizards who got us into this financial mess, yet knows the extent and duration of the worldwide economic crisis. We may be in for the long haul. But some of us will learn to enjoy life without indulging in frivolities and luxuries. In my view, we should have been enjoying and living life that way all along.