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Federal Reserve System Study: OPEC Decisions Ensure Oil Markets’ Stability

A model of an oil rig with the OPEC logo in the background. (Reuters)
A model of an oil rig with the OPEC logo in the background. (Reuters)
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Federal Reserve System Study: OPEC Decisions Ensure Oil Markets’ Stability

A model of an oil rig with the OPEC logo in the background. (Reuters)
A model of an oil rig with the OPEC logo in the background. (Reuters)

A recent study of the Board of Governors of the Federal Reserve System has concluded that OPEC’s credible decisions and research ensure the oil markets’ stability.
“We find that OPEC communication reduces oil price volatility and prompts market participants to rebalance their positions,” according to the study published on the Banks’ website.
“Our analysis indicates that market participants assess OPEC communications as providing an important signal to the crude oil market,” the study added.
“We analyze the content of the Organization of the Petroleum Exporting Countries (OPEC) communications and whether it provides information to the crude oil market. To this end, we derive an empirical strategy which allows us to measure OPEC’s public signal and test whether market participants find it credible.”
“Using Structural Topic Models, we analyze OPEC narratives and identify several topics related to fundamental factors, such as demand, supply, and speculative activity in the crude oil market,” it added.
“OPEC’s objective is ‘[...] to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets [...]’. A well-functioning crude oil market may have positive implications for the economy and inflation.”
OPEC on Tuesday stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025 and raised its economic growth forecasts for both years saying there was further upside potential.

In a monthly report, it said world oil demand will rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025. Both forecasts were unchanged from last month.
A further boost to economic growth could give additional tailwind to oil demand. OPEC's 2024 demand growth forecast is already higher than that of other forecasters such as the International Energy Agency, although the wider OPEC+ alliance is still cutting output to support the market.
OPEC said a "positive trend" for economic growth was expected to extend into the first half of 2024 and raised its economic growth forecasts for 2024 and 2025 by 0.1 percentage points.
OPEC and the wider OPEC+ alliance have implemented a series of output cuts since late 2022 to support the market. A new cut for the first quarter took effect last month.

 

 

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Saudi Arabia Approves ‘Golden Handshake’ Program Inspired by Global Models

Employees at the Saudi Ministry of Human Resources and Social Development booth at a conference (X)
Employees at the Saudi Ministry of Human Resources and Social Development booth at a conference (X)
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Saudi Arabia Approves ‘Golden Handshake’ Program Inspired by Global Models

Employees at the Saudi Ministry of Human Resources and Social Development booth at a conference (X)
Employees at the Saudi Ministry of Human Resources and Social Development booth at a conference (X)

Saudi Arabia has introduced the “Golden Handshake” program to offer financial incentives for government employees to voluntarily resign.

The goal is to reduce costs related to salaries and benefits for long-serving workers, creating space for others with lower salaries and skills suited to the country’s digital transformation.

The government has allocated SAR 12.7 billion ($3.38 billion) for the first three years of the program, inspired by similar global initiatives.

As of the fourth quarter of 2024, Saudi Arabia’s public sector employs 1.2 million people, excluding the military. The kingdom spends about 40% of its budget on salaries and employee compensation, with SAR 544 billion ($145 billion) set aside for this in 2024.

Experts, who spoke to Asharq Al-Awsat, have differing opinions on the financial compensation under Saudi Arabia’s “Golden Handshake” program for government employees. One expects the severance package to range from 12 to 24 months of salary, while another estimates it could be from 24 to 60 months of salary.

While the “Golden Handshake” is not new in Saudi Arabia, where large companies offer early retirement packages, it is a new approach for the public sector, which is traditionally seen as offering job security.

The Saudi program is similar to global initiatives encouraging voluntary resignations when employees’ skills are no longer needed. For example, the US offers up to $25,000 for employees who leave voluntarily, while the UK offers up to £149,800 for retiring police officers.

Dr. Mohammed Dulaim Al-Qahtani of King Faisal University expects compensation to range from 12 to 24 months of salary. For example, with a monthly salary of SAR 15,000, the package could range from SAR 180,000 to SAR 360,000.

Badr Al-Anzi, board member of the Saudi Human Resources Association, believes the compensation could range from 24 to 60 months of salary. For example, with a monthly salary of 15,000 riyals, the minimum compensation would be SAR360,000, and the maximum could reach SAR900,000.

Priority for the program will be given to employees with lower qualifications, and it will be available only after other options, such as transfers and skill development, have been explored. Employees close to retirement are excluded.

The government has also allowed agencies to announce vacant positions internally for five days before following regular procedures, to fill positions through transfers between government departments.

The program is expected to provide financial liquidity, encourage private-sector innovation, improve government efficiency, and reduce the financial burden on the state budget. The Ministry of Human Resources and Social Development is coordinating with relevant authorities to set the program’s guidelines.

Ultimately, the “Golden Handshake” is a significant initiative aimed at improving the efficiency of the public sector, with attractive financial compensation expected for those who participate.