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Effects of the price of crude oil
How important is oil production in saudi arabia
Impacts the current price per barrel of oil has on an economy
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Recommended: Effects of the price of crude oil
The oil sector plays a crucial role in the economic activity in Saudi Arabia. This is no surprise since Saudi Arabia possesses 18 percent of world oil proven reserves. Over the years, the oil sector contributed significantly to its economic activity and has been reflected in strong government expenditure among different sectors in the economy. While high oil revenues are certainly beneficial to oil producing countries (Saudi), it makes the Saudi economy vulnerable to price swings (see graph 1). From instance, oil prices were increasing during the boom years (2003 – 2014) and oil rents increased accordingly; however, the benefits of strong revenues soon faded in the wake of the global financial crisis 08/09 and recently in the crash of oil prices. …show more content…
In fact, oil exports determines the expenditure, government revenues and foreign earnings, and these in turn are the primary deriver of aggregate demand. The IMF estimates that oil revenues account for about 90 percent of government revenues, 85 percent of export revenues and around 40 percent of overall GDP. Thus, low oil prices will translate sequentially into lower export revenues, lower government revenues, and lower of overall GDP. If the country continues at the same pace of expenditure as before the drop, this indicates that an imbalanced budget (i.e. budget deficit) will occur (see table 1.). To balance the budget, the government could use its fiscal arm to fill in the budget gap by raising taxes, restricting expenditure, cutting subsidies or bit of each. Raising taxes, reducing expenditure or cutting subsidies, the government will face pros and cons for each option. For instance, if the government chose to raise taxes (perhaps imposing taxes since the environment is tax free), consumers will have less disposable income to spend (not applicable under the VAT), inventories will likely increase and investment drops, and unemployment will likely rise. Secondly, if the government restricts expenditure the effect might to be different across sectors. To be specific, reducing expenditure on infrastructure might not be as negative as reducing it on health care. However, because the government expenditure plays a crucial role in the economy, it may not be very good to cut down spending, but instead could allocate the spending on the most needed sectors. Finally, the government could cut subsidies (fuel, electricity..), and this is what actually happened. The subsidies cut was a successful implementation at least on fuel
In 2004, crude oil producers around the world expected a 1.5% growth in the world’s demand for crude oil. The actual growth rate was more than double the projections at 3.3%. This growth was due to rapidly industrializing of foreign countries such as, China and India. Therefore the lack of crude oil affected the supply of gasoline to consumers at the pump.
Every year the demand for oil grows, and the amount the U.S. produces decreases while the amount of oil America imports increases. In 1994 the oil imported from OPEC members was about 1,400,000 thousand barrels in 2008 it was about 2,200,000 thousand barrels. The amount of American oil imported from non-OPEC members was roughly 1,700,000 thousand of barrels to 3,000,000 thousand barrels. According to eia.doe.gov the U.S. imported roughly between 4,000,000 and 4,500,000 thousands of barrels of oil in 2010. All this boiled down means that the U.S. imports more than half of all its oil. And at the current rate the U.S. spends roughly $13 million dollars on oil per hour. Furthering its impact on our economy the NRDC found that roughly 1/5 of our trade deficit stems from imported oil. Every day the U.S. loses $390 million to foreign oil, money that could be spent on the United States’ infrastructure, or helping to get the U.S. out of its recession. This is money that is most likely not going to be reinvested in America and will only further our deficit. Another problem outside our spending is the fact that we are importing from some highly unstable nations...
The economy of the Kingdom of Saudi Arabia is oil-based economy with a strong control of its government over the major economic activities. Saudi Arabia owns 18% of the petroleum reserves of the entire world, and has been frequently ranked as the leading exporter of petroleum. Also, it has played a significant and leading role in OPEC for many years. The United States of America, on the other hand, has technologically the most dominant economy in the world. The firms of the United States are at the pole position in technological advancements, particularly, in the field of pharmaceuticals, computers, aerospace, and military equipment. This paper covers a comparative study between the economy of the Kingdom of Saudi Arabia and the United States on the basis of their Gross Domestic Product.
Saudi Arabia’s vast reserves and low costs giving Saudi the ability to manipulate prices and in the past has instigated price collapses scaring investors away from marginal projects such as the tar sands project.
Saudi Arabia is a primarily oil-based economy, with oil being the most important component of the nation’s rapid economic development since World War II. U.S. geologists discovered oil in the region in the 1930s, and since exports expanded most notably in the 1960s, production and rich revenues have been seemingly limitless. The amount of oil in Saudi Arabia’s reserves amounts to close to a quarter of the world’s entire oil resources, and today the country produces about 10,000 barrels a day. As a result, the valuable resource currently accounts for 90% of the country’s exports and contributes to 75% of government revenues annually. During the 1970s, following the Arab-Israeli war, Saudi Arabia’s economy was one of the fastest growing in the world due to a sharp increase in the value of petroleum.
Crude oil is such an essential part of our modern lives that we can often take for granted that our supply of it will remain constant. Small, unstable countries often hold great amounts of this precious resource, along with the ability to cut our supply in a moment’s notice. Therefore, the discovery of oil in Saudi Arabia caused a dramatic increase in the revenue of the country. Saudi Arabia’s newfound wealth was exploited to serve the political and economic needs of an opportunistic Islamic monarchy, while the concerns and rights of its subjects were consistently cast to the wayside. Through a global trade network, Saudi Arabia found great prosperity at the cost of sacrificing its founding principles.
Saudi Aramco is the largest producer of crude oil in the world. They account for the majority of the world’s crude oil and natural gas exports. The company is great. They treat their employees well and they look out for the environment. The company’s home office is located in Dhahran, Saudi Arabia and employees millions of people. The company is valued at ten trillion dollars and that amount climbs daily. The company has the world’s largest crude oil reserve that has an estimated two hundred and sixty billion barrels. Saudi Aramco produces more than twelve million barrels of crude oil a day. This is more than any other oil company on the globe. Though they produce large amounts of crude oil, the company is looking for other ways to be more sustainable.
Saudi Arabia’s capital market is considered to be young compared to other financial markets in the region. Saudi financial markets have been developing slowly because most enterprises in the country are either government owned or family-owned, most of which was funded through state budget, and as a result reduced the need for financing. In the recent past, Saudi Arabia has focused on a careful measurement for structural developments and regulatory changes. However, different phases of historical development of the capital market which can be classified into three phases; pre-industrialization phase, post industrialization phase and growth phase that sparked changes and shaped the kingdom 's capital market on
The UAE has 5.8 percent of the world’s oil reserves. However, while the oil prices declined in 2015; the government is working to diversify
The construction industry in the Kingdom of Saudi Arabia (KSA) is moving through a process of adaptation to a new environment of economical change. With the change in the KSA economic driving force, the construction sector is driven by competitive pressure to adapt to the recent market requirements and government regulations. The world is also in a continuous state of change and no one is exempt from this process. Increased worldwide competition, technology innovations, insufficiency of resources, all exerts a major pressure in adopting new technologies. In the business enterprise point of view, the intention for change is always a difficult and costly task and yet the capability to withstand the pressure demands and developing technologies becomes the essential ingredient for eternity. Economic, technological, social and political issues, meanwhile, have forced decision makers in construction industry to become commercially aware of their business directions. New initiatives are introduced, innovations are generated and chan...
The kingdom of Saudi Arabia is one of the largest countries in the Middle East. It occupies the Arabian Peninsula in the southwest of Asia. It is bounded by the Arabian Gulf, Qatar, and the United Arab Emirates to the East; Yemen and Oman on the South; Red Sea and Gulf of Al-Aqaba to the West; and Jordan, Iraq, and Kuwait to the North. Its area is about 2,240,000 square kilometers and has a population of seventeen million people according to the last census performed in 1993. Saudi Arabia is considered a developing country. It has been developing at a relatively fast rate since it was established as modern state in 1932. Its population increases about 3.8% per year. Saudi Arabia remains a very conservative society combining strong traditions with a strict interpretation of Islam (Al- Rasheed pp6). However, the discovery of oil in the Saudi desert territories has made it necessary for the country to quickly modernize in order to fully benefit from the resource. Large oil deposits were discovered in 1938 making Saudi Arabia the first oil-exporting country in the world. Oil revenues resulted in drastic changes in the society, especially during the past 30 years. Oil provided the Saudi state with extraordinary wealth to build the economic and material infrastructure of the country, transforming the state into a rapidly modernizing landscape. These changes have influenced the social and economic aspects of life, including the field of education. (Al-Gahtany, 2001, p.14). Oil wealth has enabled the state to make great achievements in the fields of education, technology, health, and material affluence, benefitting the people of Saudi Arabia (Al- Rasheed p.12). In celebratin...
The Saudi economy is changing tremendously recently. It has taken short period to grow from agriculture economy to global economic power with modern infrastructure. Petroleum and oil products were the reason for the growth. Nowadays not only the country export petrol and oil products but also it exports other products. The government also issued laws to facilitate the transportation of trade from the kingdom to other countries.
Oil price affects the countries around the world differently. In general, low prices are considered good for importers of oil because it not only improves consumer spending but also improves the trade balance of a country. Therefore an increase in oil prices has a significant negative impact on the GDP growth in all oil importing countries. On the other side decrease in Oil Price is bad for oil exporters as it could put a depression in revenues of oil exporting countries where oil exports play an enormously important role in
With lower gas prices people save more money and can spend it in other goods and services therefore raising that nations GDP. But for exporting countries the declining oil prices are harmful, because they suffer potentially budget downfalls. In major exporting countries such as Russia and Venezuela the downfall of oil prices is harmful for their economies. The oil extraction and production costs it normally maintain as a standard in the short run and if the sales are made at a cheaper price the revenues are less than expected. But in a long term it may become dangerous because oil producing countries budgets were based on expectations of $100 or more per barrel ( ).
The oil and petroleum industry in Malaysia operates under an oligopolistic market structure. Both PETRONAS and Shell are renowned firms that produce and sell petroleum in Malaysia. Incorporated on 17 August 1974, PETRONAS is Malaysia’s national oil company, assigned with complete ownership and control of the petroleum resources in Malaysia. Throughout the years, PETRONAS grew into a “completely integrated oil and gas corporation and is ranked among FORTUNE Global 500® largest corporations in the world” (PETRONAS, 2014).