The Importance Of Crude Oil

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Crude oil is a naturally occurring, nonrenewable petroleum product composed of hydrocarbon deposits and other organic materials. It can be refined to produce usable products such as gasoline, diesel and others. Also, it is known as a fossil fuel, which means that it can't be replaced naturally at the rate we consume it, and is therefore a scarce resource. Crude oil was first discovered and developed in late 1800s, to be globally used and considered as a source of wealth. Today, the world’s economy is extremely dependent on substances such as crude oil, which is distributed around the world but is supplied normally by a few number of states or countries, who control the largest reservoirs worldwide. In addition, fossil fuels are a primary reason…show more content…
The second is the fluctuating performance of the GCC economies due to the fluctuation of oil prices. The third is spending oil money on imported labor, not leaving a sufficient number of jobs to the fast growing and increasingly educated national population. This therefore led to the next point; high living standards will not be sponsored after the establishment of vast welfare societies, in the last half century. Ever since, GCC economies have become more dependent on high oil prices. Oman and Bahrain are rapidly losing their oil reserves and are therefore in a haste to diversify their products, Qatar and the UAE on the other hand aim for a slow diversification process. Saudi Arabia falls between the two groups. The Saudi Arabian Plan: Saudi Arabia is larger than any other GCC country in terms of land, population and energy reserves. It holds a population of 27 million, of whom 8.4 million are non-nationals. Beneath it lies 19 % of the world’s proven oil, and it has succeeded in the industry of petrochemicals by processing crude output into products of oil. However despite the oil production of 10 million barrels a day in 2011, the country still has the lowest GDP per capita…show more content…
Since the country has had massive oil reserves and a low production cost, it is likely that this sector will remain a major source of government revenue for years to come. However, due to the increasing number of alternative energy sources, Saudi Arabia started losing pricing power. The price-and-revenue balance became instable, resulting in a shortfall in the usual spending habits. After the collapse in the global prices of oil in the second half of 2014, Saudi Arabia started analyzing long term fiscal plans. Enough funds existed to sustain the country on the short term; however on the long run, Saudi Arabia faced a number of policy choices. The first, as a result of insufficiently perusing reforms, is the reduction per capita of spending on healthcare, education, social welfare and public investment. The second is increasing non-oil tax revenues, through income, corporate or consumption taxes. And the last is adopting a plan where a greater portion of future oil revenues are saved, generating a sustainable investment income to meet future spending needs. The last is the most urgent and least economically and socially costly; embracing a fiscal framework would ensure medium and long term fiscal
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