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.
The oil price increase may affect the economy activity, especially in the increase in the cost of production of goods and services, which in turn may influence the inflation rate, consumer confidence, and financial markets. Inflation happen will be transposed to consumer which eventually reduce their purchasing power and investment. During oil crisis in 1973-1974, a decline of stock prices is interpreted by the increase in oil prices and it indicate that oil price change may lead to stock market returns volatility (Bina & Vo, 2007). Crude oil price is the primary fuel of industrial activities and plays a significant role in shaping the economic and political development of the countries, not only by directly influencing the aggregate indicator but also by affecting the companies’ operational costs and its revenue. When the stock market is efficient, positive crude oil price shocks would adversely impact the companies’ cash flows and market values, lead to immediate decline in the overall stock market returns (Hamilton, 1983).
This signified as a drop and it reflected on the World oil price market that alerted countries to tighten energy product supplies due to slow oil production. It was stated that the Iranian revolution was the closest cause of the highest price in post – WWII history. However, it could be argued that the revolution’s impact on prices would be temporary and it boosts Iranian oil production after the revolution to four million barrels per day. At the same time Organization of Petroleum Exporting Countries was trimming output as well as the companies and governments started to build reserves. With the combination of those actions causes an upward surge on oil prices which escalated from $14 per barrel of the beginning of 1979 to more than $35 per barrel in 1981.
posted 52 minutes ago (last edited 45 minutes ago) Rima Ezzeddine The Importance of Trade and Globalization to Saudi ArabiaThe Importance of Trade and Globalization to Saudi Arabia COLLAPSE The Importance of Trade and Globalization to Saudi Arabia “…Globalization is a world in which societies, cultures, politics and economics have, in some sense, come closer together. "(Routledge, 1998, P.3) Nowadays with the existing of the fierce competition of trade among countries and the thrive for economic growth all around the globe, arises the globalization issue as a major role that contributes in the prosperity of each country in all sectors. Saudi Arabia is a country which its economy heavily depends on oil production. It contains
Heavy dependence on petroleum revenue continues, but industry and agriculture now account for a larger share of economic activity. The mismatch between the job skills of Saudi graduates and the needs of the private job market at all levels remains the principal obstacle to economic diversification and development; about 4.6 million non-Saudis are employed in the
For instance, Trinidad and Tobago was dependent on export trade revenues received from oil that represented a major dynamism in the economy. The quadrupling of the oil prices in 1973 placed us in a good position in trade. As the export price raised
While the neoliberal/monetarist proponents see the quantum of money supplied as the primary drivers of inflation, the Structuralists point to problems located in institutions, public utilities and infrastructure, security, corruption, goods hoarding and hedging, etc, as causes of inflation. Beside the neoliberal/monetarist and structuralists argument, factors causing inflationary pressures in Nigeria can be located in the forces of demand and supply. Despite effort to grow the agricultural and the solid mineral sectors, Nigeria still depend primarily on crude oil for revenue. In this context, oil prices and it vagaries, detect goernment expenditure (Ikoh & Ukpong, 2010). Whenever the takings from oil are high,government expenditure is heightened.
The two main instruments of fiscal policy are government taxation and government expenditure. It can also be seen as government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Impact of Fiscal Policy on Manufacturing Sector Output in recent time, various authors have suggested in the literature that fiscal policy has an important role in the growth of Nigerian economy through manufacturing sector output and that high growth rates are found in the economy where the manufacturing sector share in GDP is increasing.
Through the adoption of sound strategic management models, public institutions can still deliver public goods and services even to the underserved communities. Nigeria’s dependence on oil is possibly the side through which the global financial crisis hit Nigeria the most. This is because the Nigerian economy is so dependent on the crude oil income that jolts immediately impact negatively on economic prices in substantial degrees. A crucial strategic management decision that needs to be made by the government is the adoption of an economic diversification strategic plan in favor of non-oil based
In fact, other businesses were also indirectly affected including the consumers where they were of the notion that the increase in the price of the retail petroleum products could cause a general increase in the price of goods and services in the market. The impact of inflation on stock market returns is becomes an important issue for a many years. Inflation is most important macroeconomic variable that have negative impact on economic activities. Higher inflation lead the interest rate be higher and it cause the rate of returns on stock will be raised. To get the knowledge about the impact of inflation is very important for an investor if it became out of control then plans may destroyed.