Manal Shehabi

KFAS Supernumerary Research Fellow

Dr. Manal Shehabi is the KFAS Supernumerary Research Fellow of the Oxford Institute for Energy Studies.  Prior to that, she was a researcher at the University of Western Australia, where she also taught introductory and advanced undergraduate courses in economics, and a Visiting Research Fellow at the OIES since 2016.

Dr. Shehabi’s research addresses economies of resource-rich countries focusing on the Middle East and the Gulf states, applied macroeconomics, energy, economy-wide modeling, political economy of energy and economic reform.  Her most recent research focused on petrostates’ economic policy and performance, focusing on post-Gulf War Kuwait.  Using economy-wide modeling with oligopoly and political economic analyses, her research made important contributions to the analysis of economic adjustment and policy alternatives in the face of the recent declines in petroleum prices.  This research spans energy economics, economy-wide modeling, labor policies, and energy subsidy reform.  Her other research interests include renewables, global transfer pricing and tax, gender, and imperfect competition.

In addition to her research experience, Dr. Shehabi has expertise in energy and mining multinationals’ transfer pricing, gained in the US and Australia while working as an economist consulting for a Big Four professional services firm and for a taxation firm, and as the in-house expert for a multinational mining and oil services company.  She advised multinationals, including Fortune 500 companies, in energy, mining, and other industries on global transfer pricing arrangements, audit defenses, and modeling for services costs allocation mechanisms and valuation of intangible property.  Prior to that, she successfully launched and managed a business public policy project, researched investments in the oil industry in West Asia at the UNCTAD, and examined political and economic development in Iran.

Dr. Shehabi holds a PhD in economics from the University of Western Australia; an MIA-Economics from Texas A&M University; a B.A. (Honors) magna cum laude from Ursinus College where she was Queen Noor-Ursinus College Scholar; and diplomas from Harvard Business School Publishing and France’s Université Marc Bloch.  A polyglot, her language capabilities include Arabic, English, French, Spanish, and Mandarin Chinese.

Twitter:  @ManalShehabi 

Contact

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After the recent oil price declines in mid-2014, Middle East and North Africa (MENA) oil exporters including Kuwait reduced energy subsidies and passed economic diversification-enhancing policies in an attempt to improve fiscal balance and economic sustainability. This paper argues that these economies already have a diversified base but this base has not contributed to export or fiscal diversification due to structural constraints and economic distortions.  Using illustrations from Kuwait, this argument is tested with simulations using an economy-wide general equilibrium model that embodies key features of the Kuwaiti economy—including subsidies, sovereign wealth funds, industrial oligopolistic structure with collusive pricing, and a labour market that depends heavily on a segregated expatriate labour force. Model simulations confirm that after an oil price decline, subsidy reform alone adds little impetus to diversification, but that relaxing some economic constraints, through mobility of Kuwaiti labour (which simulate Kuwaitization policies) and competition reform, would achieve large efficiency gains throughout the economy and could expand non-energy tradable sectors. This result supports the argument put forth in the paper that weak economic diversification in MENA oil exporters is not primarily due to Dutch disease, as is frequently argued in the relevant economics literature, but to economic and structural constraints and economic distortions. The results have two key policy implications.  In small MENA economies, pricing regulation has the potential role of moderating the economic impacts of oil price volatility. And in developing oil economies with pervasive oligopolies like those in the Gulf region, microeconomic reform can achieve efficiency and enhance the diversification effects resulting from energy and fiscal subsidy reforms.  Finally, implementing reforms that reduce distortions is a politically complex process, therefore, to achieve meaningful diversification and fiscal sustainability, these reforms ought to be implemented as part of a wider set of broader economic, social, energy, environmental, cultural, and institutional reforms.

[post_title] => Diversification in Gulf hydrocarbon economies and interactions with energy subsidy reform: lessons from Kuwait [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => diversification-gulf-hydrocarbon-economies-interactions-energy-subsidy-reform-lessons-kuwait [to_ping] => [pinged] => [post_modified] => 2019-04-29 12:53:53 [post_modified_gmt] => 2019-04-29 11:53:53 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31528 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 31384 [post_author] => 111 [post_date] => 2019-01-31 12:14:50 [post_date_gmt] => 2019-01-31 12:14:50 [post_content] => Although pervasive, subsidies have long been accepted by economists as a generally inefficient, costly means of resource allocation that leads to wasteful consumption and distortion of international trade and local markets. Oil-exporting economies have adopted energy pricing reform since the collapse of the oil price in mid-2014, despite lingering fears that such efforts would hurt industries’ competitiveness internationally. The World Trade Organization (WTO), a proponent of subsidy reform, has advanced that had targeted effectuating subsidy reform through the use of trade rules.  Yet there is limited evidence on the linkages between trade and energy subsidy reform in the context of oil-exporting economies. This Insight gives a non-technical commentary of a paper which attempts to fill a gap in the literature by examining the impact of fossil fuel subsidy reform on trade (inflow and outflow) in an oil-producing, ‘almost’ small economy, focusing on the case of Kuwait. It employs a two-region economy-wide model with oligopoly behaviour to quantify the impact of Kuwaiti subsidy reform on trade. The model extends that of Shehabi (2017) by differentiating consumer- and industry-specific subsidy rates, and it also embodies unique elements of Kuwait’s economic structure (rigidities) and distortions in its industrial structure and labour market. The results show that the impacts of subsidy reform on trade are driven by existing idiosyncratic economic rigidities and distortions. Simulations clarify the fact that energy production subsidies have minimal effect on the international competitiveness of Kuwaiti non-energy sectors, due to the pervasiveness of oligopolies that sustain large markups and collusive pricing. As such, contrary to what the WTO’s polices suggest, the expansion of non-oil exports is constrained in its ability to moderate reform impacts in a low oil price environment due to institutional, political, and economic constraints. Yet with appropriate incentives, such dynamics could be considerably more effective—leading to potential expansion. Subsidy reforms have higher pro-trade effects if implemented in a low oil price environment because their negative effects are partially offset by efficiency gains and reduction in oligopoly markups. The analysis shows that in developing oil exporting economies characterized by pervasiveness of oligopolies, microeconomic reform can be a channel through which the pro-trade effects of energy subsidy reform can be achieved.  The results have great policy implications, including that organizations like the WTO should use benefits other than non-energy expansion to encourage oil economies to reform energy subsidies. [post_title] => Is energy subsidy reform in an oil-exporting small economy beneficial to trade? Illustrations from Kuwait (Non Technical Summary) [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => energy-subsidy-reform-oil-exporting-small-economy-beneficial-trade-illustrations-kuwait [to_ping] => [pinged] => [post_modified] => 2019-03-20 10:06:50 [post_modified_gmt] => 2019-03-20 10:06:50 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31384 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 30731 [post_author] => 111 [post_date] => 2017-11-13 10:31:53 [post_date_gmt] => 2017-11-13 10:31:53 [post_content] => From mid-2014 Kuwait has experienced a substantial drop in its oil export price and, consequently, government revenue, causing a severe fiscal deficit and impaired economic performance.  Cutting energy subsidies has become a policy priority.  In the face of widespread opposition, the government raised gasoline prices in August 2016, proclaiming such reform key to solving its economic problems; yet recent policy discussions have not addressed the mechanism of pricing reforms.  The paper offers a quantification and assessment of energy pricing reform in the current low oil price environment via a general equilibrium model of the Kuwaiti economy that embodies the structure of its economy and its labour market, its oligopolistic industries and their collusive pricing behaviour, and external flows associated with its sovereign wealth fund.  Simulations clarify the required adjustments, including the seldom discussed expatriate labour exit and the decline in oligopoly rents.  While necessary, subsidy reform implies tradeoffs, notably between fiscal stabilisation and cost of living sustainability.  The results confirm that successful implementation must be accompanied by carefully designed mitigation measures and associated microeconomic reforms. 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After the recent oil price declines in mid-2014, Middle East and North Africa (MENA) oil exporters including Kuwait reduced energy subsidies and passed economic diversification-enhancing policies in an attempt to improve fiscal balance and economic sustainability. This paper argues that these economies already have a diversified base but this base has not contributed to export or fiscal diversification due to structural constraints and economic distortions.  Using illustrations from Kuwait, this argument is tested with simulations using an economy-wide general equilibrium model that embodies key features of the Kuwaiti economy—including subsidies, sovereign wealth funds, industrial oligopolistic structure with collusive pricing, and a labour market that depends heavily on a segregated expatriate labour force. Model simulations confirm that after an oil price decline, subsidy reform alone adds little impetus to diversification, but that relaxing some economic constraints, through mobility of Kuwaiti labour (which simulate Kuwaitization policies) and competition reform, would achieve large efficiency gains throughout the economy and could expand non-energy tradable sectors. This result supports the argument put forth in the paper that weak economic diversification in MENA oil exporters is not primarily due to Dutch disease, as is frequently argued in the relevant economics literature, but to economic and structural constraints and economic distortions. The results have two key policy implications.  In small MENA economies, pricing regulation has the potential role of moderating the economic impacts of oil price volatility. And in developing oil economies with pervasive oligopolies like those in the Gulf region, microeconomic reform can achieve efficiency and enhance the diversification effects resulting from energy and fiscal subsidy reforms.  Finally, implementing reforms that reduce distortions is a politically complex process, therefore, to achieve meaningful diversification and fiscal sustainability, these reforms ought to be implemented as part of a wider set of broader economic, social, energy, environmental, cultural, and institutional reforms.

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Latest Publications by Manal Shehabi

Latest research by Manal Shehabi