THE IMPACT OF DECLINE OF OIL PRICES ON KUWAIT CONSTRUCTION INDUSTRY

Abstract

The oil price has fallen significantly from its peak at $128.14 per barrel in March 2012, reaching a low of $29 in February 2016. Kuwait depends mainly on oil revenue to finance infrastructure governmental projects. Oil price decline has a direct impact on economic and capital expenditure in the construction industry’s resources in Kuwait, specifically construction material. This research investigates the effect of changes in oil prices over range from 2007-2017 on the construction industry in Kuwait. Different types of data regarding global economic data, construction materials, and awarded contracts during the study period were gathered and analyzed. A set of statistical and correlation analysis are performed. The study revealed that many construction materials are affected by oil price in Kuwait. The GDP is highly affected by oil price drop; this implies that there is a limited result of government plans to divers governmental finance. A regression model is proposed to forecast the construction cost per square meter in Kuwaiti dinar based on study variables. The study results can be used to evaluate the effect of oil price drop in similar construction environments such as Gulf countries and to predict construction costs changes due to oil price decline.