EPRS | European Parliamentary Research ServiceAuthors: Christian Dietrich, Patryk PawlakMembers’ Research ServicePE 579.078

At a glanceMarch 2016Infographic

Low oil prices and the fight against ISIL/Da’esh

2020 2030 2040 2020 2030 2040 2020 2030 2040Coal

Oil

GasNuclearHydro

Bio-energy

Other re-newable

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22%

22%11%4%

15%

10%

29%

27%

23%5%3%9%4%

25%

26%

24%

7%3%10%5%

Map of 2014 production of petroleum and other liquids (millions of barrels per day; only countries with values over 60 000 bl/d shown)

5<1 10 <15

-100%10% change in production of

petroleum and other liquids 2014/2013

Production a�ected by protests and deteriorating security environment at oil facilities.

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0102030Operating cost

(US$ per barrel, 2014)

The price of oil has fallen signi�cantly since June 2014, from a peak of US$115 per barrel (bl) then to US$26 per barrel in January 2016, although it has somewhat recovered recently. This can partly be explained by weaker demand, robust supply growth and the expanding coverage

of mandatory energy e�ciency provisions worldwide. These changes come at a time of major turmoil in parts of the Middle East. Iraq – with the world’s �fth largest oil reserves – is engaged in the �ght against ISIL/Da’esh which controls some of Iraq’s oil �elds. Syria – with a

national budget largely dependent on oil revenues – is torn apart by civil war. Iran, on the other hand, is returning to international oil markets as a result of the gradual removal of sanctions against it, in line with the agreement on its nuclear programme.

Takes into consideration only those policies for which implementing measures had been adopted by mid-2015 and assumes they persist.

Considers current policies and announced intentions, even if the precise implementing measures have yet to be fully de�ned.

Sets out an energy pathway consistent with the goal of limiting the global increase in temperature to 2°C.

While the supply of oil to the international market has been increasing over recent years, demand has been slowly decreasing. The World Energy Outlook 2015 forecasts the market rebalancing at US$80 per barrel in 2020, with a further increase in price thereafter, but does not rule out a more prolonged period of lower oil prices.

Current policies scenario New policies scenario ‘450 scenario’

Trends in energy demand

Changes in global oil market

Sources: US Energy Information Administration, International Energy Agency, International Monetary Fund

Members’ Research Service Page 2 of 2

EPRS Low oil prices and the fight against ISIL/Da’esh

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Involvement* in the con�ict in:Syria Iraq Yemen

* Involvement may refer to any of the following: naval support, aerial combat, intelligence, boots on the ground.

0

3

6

9

12

15%

2013 2014 2015 2016 2017 2018 2019 2020

Yemen

UAE

Saudi Arabia

Qatar

Oman

Libya

Kuwait

IraqIranBahrain

Algeria

Defence spending(% of GDP)

0 300 6000 10 200 3 6

Gross o�cial reserves2016values

* projections

(US$ billion)Real GDP growth (annual change, %)Crude oil exports (millions of barrels

per day)

104.5%

14.7%18.2%

-13.6%-22.9%136.4

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55.87.53.25

60.518.20.87

39.71.8

1.94

2010/11201220232014

*2015*2016

2010/11201220232014

*2015*2016

YemenUAE Saudi ArabiaQatarOman

LibyaKuwaitIraqIranBahrainAlgeria

80 000 to120 000barrels per day

2 to 6US$ million/day

0.5 to 1US$ million/day

10 US$million/month

20 000barrels per day

25 000�ghters

BEFORE COALITION STRIKES

CRUDE OIL REVENUE

CRUDE OIL PRODUCTION

AFTER COALITION STRIKES FIGHTERS’ PAY

Algeria-62%

Bahrain-62%

Iran-67%Iraq

-50% Kuwait-64%

Libya-10%

Oman-60%

Qatar-67%

Saudi Arabia-62%

UAE-66%

Yemen-48%

Change in crude oil export revenue(2016 projection/2014, annualised)

300

10050

10 US$ billions2014 (US$ 98.89 per barrel)

2016 (US$ 37.52 per barrel)

Low oil prices have adversely a�ected the budgets of oil-producing countries, causing losses in revenues. The situation of con�ict-torn countries like Libya, Syria, Iraq and Yemen, whose budgets are heavily dependent on oil, is particularly di�cult. Many of the Gulf countries, however, will be able to withstand low prices, thanks to high �nancial reserves built up over years, in the hope of eliminating some competitors.

The convergence of lower oil prices, increased e�orts of the law enforcement community, and the military response to curb ISIL/Da'esh �nances have contributed to reducing the group's revenue, and consequently weakened the 'caliphate's' capacity to fund its 25 000-strong army.

Bahrain, Kuwait, Iran, Saudi Arabia, UAE, and Qatar are �nancially, diplomatically and militarily engaged in the con�icts in Syria, Iraq and/or Yemen. While regional stability proves elusive and the share of defence spending in national budgets is projected to decrease towards 2020, Saudi Arabia, Qatar and the UAE will remain among the biggest defence spenders globally.

Oiling national budgets

Cutting ISIL/Da’esh’s cash �ows

Oil and security

Sources: International Monetary Fund, US Energy Information Administration

Source: IHS

Sources: Financial Action Task Force, Thomson Reuters