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Oil market: Calls to reduce prices in the 2025 budget
4/17/2025
- Baghdad
Fluctuations in oil prices continue to raise concerns in Iraqi circles, given the significant repercussions for the country's economy, which relies heavily on oil.
Oil prices have fallen sharply this year, particularly over the past two weeks, after US President Donald Trump's sweeping tariffs triggered turmoil in global markets.
In mid-2023, Parliament approved a spending plan extending through 2025, assuming a price of $70 per barrel in the 2023 budget, with the possibility of price revisions in subsequent years.
In this regard, Mazhar Mohammed Saleh, the Prime Minister's financial advisor, confirmed that the estimated price of oil in 2025 will be less than $80 per barrel.
Saleh said that oil prices are a key indicator in determining the 2025 general budget revenues, but they are not the only decisive factor.
Speaking to Al-Eqtisad News, Saleh explained that the most important aspects of public finance management are the total spending ceiling and financial discipline, along with hedging against fluctuations in the oil asset cycle. He emphasized the need to adopt a cautious approach to calculating oil revenues and estimating potential borrowing levels.
He pointed out that spending priorities must be taken into account when preparing the budget, most notably securing salaries, wages, and pensions, social welfare, agricultural support, and completing development and service projects in accordance with the government's program.
The economic advisor explained that the country entered the second quarter of fiscal year 2025 amidst remarkable financial stability, which enhances the ability to implement fiscal policies efficiently and with balance.
Parliamentary and economic figures have warned the Iraqi government of a significant price drop in the coming period, prompting it to set prices appropriate to the challenges of the current phase.
In turn, MP Hussein Mounes, a member of the Parliamentary Finance Committee, confirmed that the committee had called for hedging in oil pricing since the approval of the 2022 three-year budget law.
Speaking to Al-Eqtisad News, Mounes warned of a global price decline, which is expected as a result of the repercussions of the Russia-Ukraine war, which has pushed prices to abnormal levels.
Mounes explained that the Ministry of Oil has clear indicators that oil prices are headed for a decline, noting that the stabilization of oil prices for three consecutive years within the framework of the three-year budget represents a "planning error," the repercussions of which are already beginning to appear on the economic landscape in Iraq.
He added that the current year's budget schedules have not yet been submitted to the House of Representatives, and that the House has not yet been informed of the assumed oil price that will be used in preparing the budget. He emphasized that "the current financial and economic situation requires the government to revise its oil price estimates toward a reduction, in line with developments in global markets."
Iraq is entirely dependent on oil revenues. Despite provisions in federal budgets to boost non-oil revenues, such as border crossings and tax collection, none of these have been implemented properly, and their revenues remain small and insignificant.
Meanwhile, economic expert Salah al-Moussawi warned of a future financial crisis that Iraq may face as a result of the expected sharp decline in global oil prices. He noted that signs of this decline began with the tariff crisis imposed by former US President Donald Trump.
Speaking to Al-Eqtisad News, Al-Moussawi said, "Oil prices have been on a downward trend since the crisis, and are expected to reach around $15 per barrel by 2033." He emphasized that such a decline would cause a significant decline in Iraq's oil revenues and could negatively impact the salaries of employees and retirees.
Al-Moussawi suggested that the Iraqi government adopt a hedging price for oil at $50 per barrel in the budget, noting that this price reflects the reality of the international market.
He explained that Saudi Arabia is capable of increasing its production by two million barrels per day, while the United States can increase shale oil production by three million barrels per day, which will contribute to lowering prices to less than $50 per barrel, which is in the interest of Western markets, especially Europe and the United States.
Iraq, OPEC's second-largest oil producer, exports about 85 percent of its crude oil through ports in the country's south, but the northern route via Turkey still accounts for about 0.5 percent of global oil supplies.
It's worth noting that Iraq's budget for this year exceeded 226 trillion dinars after being approved by Parliament, which is higher than last year's budget of 198 trillion dinars.