Alisher AlievPlanning Manager| Enter Engineering Co LtdTashkent, Tashkent, Uzbekistan
How do you think, due to dropping down oil price, it can impact for execution of some project? How it can impact world economy?
What consequences can be? Saving Changes...
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Anonymous
I think Oil price will go up in middle of summer and it will costs 45-48$. Saving Changes...
Depends on the context of the project and the nature of the procurement commitment (e.g. locked in at a set price) for oil and oil-dependent budget items.
While direct fuel costs may decrease, other material and labor costs might increase and overall budgets could be slashed due to lower revenue projections for most sectors.
This is a good example of a single changed factor which might not be the main driver of change to projects given the complex dependencies between multiple variables.
Less economic activity as a result of restrictions imposed by the COVID-19 virus has resulted in a drop in sweet and crude oil prices. This drop will take a while to felt at the pump as most of this price drop is reflected in future contracts.
The most immediate impact will be countries and organizations that are dependent on oil revenue for capital expenditure spending and associated programs and projects.
One thought that comes to mind is the Aramco flotation and how they are already pulling back of public spending in Saudi Arabia is going to be exacerbated by the the drop in oil price.
The one good thing about restrictions and sanctions imposed on Iran and Iraq in recent times means that their economies have not become totally reliant on oil revenue for economic activity.
But there is an upside for a drop in oil prices especially if they are passed onto the consumer. It can reduce inflation, spur new sales in energy efficient cars and bring down the trading deficit between trading partners.
