Recently we have seen a gigantic drop in oil prices worldwide and this is affecting the oil giants across the middle east and the people of those countries as well.
Many middle eastern nations are very reliant on oil and as current oil prices have slumped, the countries are scrambling to make ends meet and to successfully diversify their economies.
The U.S. is currently pushing oil production, the domestic product has nearly doubled in the past several years. Also, Canadian oil is growing in exports each year. With this, middle eastern oil is forced to compete with Asian markets and thus, they must reduce their pricing. Moreover, international sanctions have been lifted off Iran after the Islamic revolution in 1979. Iranian oil companies are already saying they are ready to boost their production to 500,000 barrels a day. Along with the fact that people are starting to buy more hybrid and electric cars and there is somewhat of an initiative to use green – technology there essentially is less of a demand for oil.
This drop in the prices of oil have effect 250,000 workers worldwide and has caused many oil giants to go bankrupt. The OPEC countries are scurrying in order to take back their primary commodity from these new players on the field. Primarily middle eastern oil nations are getting hit very hard. Moreover, this will affect the people of states as UAE because they would need to implement a tax or increase tax as many states in the region have either very low or no tax.
In countries like the United Arab Emirates oil accounts for about 30% of their total gross domestic product and in Saudi Arabia oil accounts for 45% of their GDP.
Initiative to more successfully diversify, their economy has already taken place. The economic minister of the United Arab Emirates said that since there has been an increase in revenue from the financial sector through the Abu Dhabi Global Market this would be successful, strategy in diversification, of their economies. Also, he stated that they needed to attract more industries and this would serve as “a catalyst for diversification”.