Two years for oil prices to affect contractors

22 December 2014

Construction industry will not be affected for at least two years, says director of Oman’s Sarooj Construction Company

The director of Oman’s Sarooj Construction says the company’s strategy will not change despite falling oil prices.

Simon Karam, director of the contractor, tells MEED that the firm’s budgets and financial strategy will remain the same, despite falling oil prices.  

However, Karam admits that companies may need to think of their finances if oil prices continue to fall or remain low in the long term.

“We will be affected in 2016 if the prices remain low,” he says. “There is a usually a two-year gap before you see the effects.”

The biggest concern for contractors is any sort of hold on public spending due to reduced revenues from oil exports. And while many projections have said GCC states may be forced to cut spending, the rhetoric from governments has been that the slump in oil price has yet to provide any precedent going forward, and this dip will not derail project plans.

For Oman and Bahrain, this rhetoric is problematic. Low reserves and an inferior fiscal surplus compared with the rest of the region means they may have to reconsider budgets as deficits become inevitable. Any long-term slump in oil prices will eventually significantly reduce revenues and, in turn, limit public spending for these countries.

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