The Middle East and the oil price crisis – what the next five years will bring

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This has, of course, had an impact across the petroleum industry, but it has also raised attention to possible policy adaptations that will stand the region in good stead over the next five years. Assuming that adapting to this 'new normal' continues, the past year should hopefully prove to have been the toughest for governments and industry.

The oil industry in the GCC region is robust: a large, mature industry with a lot of producing assets that will continue to operate and produce petroleum commercially for the foreseeable future. The income it is generating is down, but production and investment are likely to continue at current levels, unless a political decision is taken to alter the current production levels.

Meanwhile, governments are beginning to look at diversifying their income to cover more than just oil revenue, and at reducing their budgets where possible. The United Arab Emirates has removed the country's long-standing fuel subsidy for petrol and diesel, for example, setting the price based on market rates. While this impacted the household budget for most people living here, on the macro level it is recognised as a sound policy and one that other countries are likely to follow.

Likewise, governments are considering putting in place value added tax (VAT) and corporation tax: something that has been discussed in the past, but a consensus is building that now might be the right time to act. These would bring income from a broader range of industries and, even if the taxes are set very low, establish the concept in the region's business mindset for the future.

In an interesting side benefit, these taxes would also bring a clearer view of the whole economy. One of the interesting indirect outputs of tax collection is that it provides a lot of economic data. In a country where taxes are not regularly collected, therefore, there is less understanding of the economy as a whole. It could be that the non-oil economic activity in the region is underestimated, but at present there's no way to know. The headline figures for the region, therefore, may surprise us if more data were collected.

Governments are also looking to bring income streams from different sources. That's very hard to do when the oil price is high, as the oil and gas industry is a very powerful economic influencer and other industries struggle to compete.

Now, however, we may see some investment shift to other areas such as more downstream development rather than continuing with exploration and production, to improve the return on investment, and there will be a move towards gas production for power generation and for local economic development.

There may be some rethinking of vanity projects, and a greater focus on social and industrial infrastructure.

Tighter government finances will also bring efficiency to the market. We may see more of a move towards PPP-type funding than we have in the past, which will inevitably force a more competitive approach as contractors have to justify their work to investors and lenders rather than just to the government. The government tends to have different priorities: to employ people, or to build homes, for example, without too much questioning of how that is achieved. Getting your funding from a bank or other lender imposes a different discipline, because you have to take into account the return on investment that your lender is looking for.

In a tighter fiscal environment there is also likely to be an increase in legal disputes. This will increase the need to have robust contractual arrangements in place at the outset of any project or investment.

This potential for greater disputes, plus the need to satisfy the demands of banks or investors where alternative funding mechanisms are used, means that greater discipline will be needed in the documentation of projects and investments in the region.

In sum, the impact of the oil price is undeniable, and it is causing change across the region. However, the GCC countries have built up very large reserves and have a lot to draw upon. The region has seen difficult periods before. Compared to the 1980s, when oil last went through a sustained period of low prices, the GCC now is arguably better positioned, with a low debt to GDP ratio and a lot of money invested and saved.

In five years, therefore, the region will likely have settled down from this year's price shock. It will have created a leaner, but still profitable oil industry, and a more diverse general economy. With oil 'off the boil', it is no longer using up all available manpower, all the warehouse space, and driving up prices – so other industries have a chance to grow and flourish.

Of course, things can happen in five years to push things off course, but overall I am optimistic about the future of the region and its industries. The oil price may not see the sustained level it did between 2010 to 2014 for quite some time - but the industry and region flourished at $50 a barrel for oil before, and if governments and industry adapt properly, they can continue to do so again.

Dubai-based Jason Rosychuk is an oil & gas and projects expert at Pinsent Masons, the law firm behind Out-Law.com.