Higher spending has pushed the UAE's break-even price for oil - the price per barrel needed to balance government books - to US$107, the highest in the GCC, according to Emirates NBD.
Only five years ago, the break-even price was assumed to be about $30 a barrel, but spending has ballooned because of the financial crisis, rising social outlays and heavy investments in infrastructure.
"The UAE's break-even oil price has risen sharply over the last five years, as expenditure has grown from around 18 per cent of gross domestic product in 2007 to an estimated 30 per cent of GDP in 2012," the bank said in its quarterly report.
Abu Dhabi's oil revenues hit a record high last year of above $100 billion (Dh367.3bn), based on an average price of $111 a barrel and a production of 2.6 million barrels daily.
Prices have risen on unrest in the Arab world and supply fears, stoked by sanctions on Iran.
Crude oil futures rose by a further 14 per cent in the first three months of this year, driven by disruptions in non-Opec producers such as South Sudan and Yemen.
High revenues have helped several GCC nations to improve the livelihoods of citizens through public spending.
Sheikh Khalifa, President of the UAE, ordered pay rises of up to 45 per cent for all Emirati employees of the federal Government to mark the 40th National Day last December. Abu Dhabi has also committed to spending $1.6bn on schools, power and housing while extending the distribution of subsidised fuel to other emirates.
Brent, the benchmark for crude oil in Europe, sold at about $121 a barrel yesterday, while crude traded on the New York Mercantile Exchange at about $101 a barrel.
Signs of weakening demand in Asia and the United States have given rise to predictions that prices might fall later this year.
"The issue right now is not so much supply but demand. An uncertain economic recovery in the industrialised nations is being compounded by slowing growth in the developing world," said Bill Farren-Price, the head of Petroleum Policy Intelligence.
European and US prices retreated yesterday on news that inventories in the US had increased, reflecting rising domestic production and stalling demand.
"The fiscal position is more vulnerable to a sharp decline in oil prices than was the case five years ago," Emirates NBD said in its note.
In a recent poll of analysts, Reuters estimated the UAE break-even price was a much more modest $86 a barrel.
Kuwait and Saudi Arabia were estimated to require $75 a barrel to balance the budget, while Qatar was estimated to be the least vulnerable GCC state, with a break-even of $55.