Live Chat

Oil is a More of a Blessing than a Curse

Abstract

Economic growth and welfare of many countries largely depend on the level of development of their oil industries. At the beginning of 21st century, oil remains an important resource and one of the most significant objects of world trade. Most of types of industries are in different ways connected to oil and its derivatives, and many countries spend much of their state budgets to cover its shortage. However, there are different points of view whether oil is a considerable advantage and brings only economic and political profit or it also can bring many troubles to those who have it. The aim of this essay is to decide which point of view is closer to the truth using Saudi Arabia as an example. To support point that oil is a blessing, three main reasons were analyzed: economic benefits, including earnings from export and sustaining high standards of life; political influence; and refutation of the fact that environmental pollution is a significant flaw of production and export of oil.

Oil is a More of a Blessing than a Curse

A country that possess huge amounts of oil in its subsoil and can benefit from its export has many advantages. Today, most of the states with large oil deposits are chiefly rich, with high GDP per capita and, respectively, high living standards. Some African countries, such as Algeria, Libya, Angola, and Nigeria, used to suffer from poverty and corruption and were widely known as one of the poorest states in the world. However, now they use oil exports to stimulate their economic growth. Oil is an important resource that helps countries to avoid many economic difficulties, strengthens their position in foreign policy, and allows to avoid the environmental pollution, if used with modern equipment and high technologies.

Economic Benefits

The first and the main reason why oil is a blessing is revenue from oil exports, which gives an opportunity to sustain high state income and decent standards of life of the population. Saudi Arabia is the world’s leading oil exporter and second producer, after Russia. The Kingdom also holds the second place after Venezuela, having about 260 billion barrels of oil reserves. It is near 20% of world’s total reserves (Energy Information Administration, n.d.). Overall, petroleum sector in Saudi Arabia forms 55% of GDP, 90% of export income and more than 92% of total state budget revenues (Saudi Arabian Monetary Agency, 2013).

Saudi Arabia’s oil richness allows the country to provide relatively high living standards for its citizens. According to World Bank, in 2014, GDP per capita in Saudi Arabia was $25,409, being on the thirtieth place in the world (The World Bank, n.d.). Even rapid fall of oil prices in mid-2014 did not significantly influence main Kingdom’s economic indexes, as in case, for example, of Russia, which suffered considerable reduction in GDP and devaluation of its national currency.

As a leading OPEC member, Saudi Arabia has a large impact on world’s petroleum prices. Although many states try to reduce the influence of oil prices on their economies by developing scale ‘green energy’ programs, the Kingdom’s government seems to have nothing to worry about in terms of decrease in earnings from oil export for the next few decades, at least until ‘green energy’ becomes a considerable alternative to oil.

As most of the countries with large deposits of oil, Saudi Arabia began its economic growth exactly from the very moment its deposits were revealed. Before that, it was horribly poor, with one of the lowest levels of living standards in the world. The same is applicable to other now wealthy countries of the Persian Gulf, like Qatar, Kuwait, and the United Arabian Emirates. It is noteworthy to say that without oil earnings these countries would be probably much less developed than they are today. Not to mention such African states like Algeria, Angola, Libya, and Nigeria, which even today with their benefits from oil exports are not considered as rich or developed. Nevertheless, oil gives these states an opportunity they would not have without ‘black gold’ – to sustain their economies in relative stability and reduce their dependence on international financial aid. However, a high level of corruption still holds these countries on the backdoor of world politics, unlike the countries of the Persian Gulf, including Saudi Arabia, which is no doubt the most influent player in the region.

Political Influence

Oil is a blessing also because of political influence given to the countries that have this resource. On the example of Saudi Arabia, we can see that its leadership in OPEC organization gives it not only financial benefits. Besides OPEC, the Kingdom is a founding member of Muslim World League, Arab League, Organization of Islamic Cooperation and Gulf Cooperation Council (Ministry of Foreign Affairs of Saudi Arabia, 2011). Oil is a significant factor for Saudi Arabia to be an important member of the International Monetary Fund and the World Bank. In 2005, Saudi Arabia has also joined the World Trade Organization.

The country is considered as an ‘ally’ in the Middle East for the Western developed states generally and the USA in particular due to the fact that it is the main Kingdom’s oil importer. As a founding and leading member of the OPEC, Saudi Arabia uses its influence in stabilizing the world oil market and moderates sharp oil prices fluctuation in order to support Western economies (Organization of the Petroleum Exporting Countries, n.d.). These warm relations sometimes strain due to the tensions between Saudi Arabia and Israel, the American ‘prot?g?’ in the Middle East.

Overall, it is obvious that oil is a valuable tool for Saudi Arabia in maintaining its successful foreign policy and can prevent it from most economic and even military threats. Sometimes it can be used for economic containment of other countries with the strong role in oil exports in their economies, as it was in case of Russia in the middle of 2014, when the increase in oil production in Saudi Arabia led to oil price reduction and eventually caused a significant strike on Russia’s economy. Thus, the Kingdom’s actions complemented international sanctions imposed by the West after the annexation of the Crimea peninsula in Ukraine. It has also confirmed the importance of Saudi Arabia for the Western countries and its weight in world politics.

Environmental Safety

Oil can also be a blessing for the reason that one of the most widely used shortcomings of oil production, such as environmental pollution, are not actually flaw or disadvantage. The level of contamination and harm to nature in most cases depends on technologies and reliability of the oil producers.

Most of the accusations against oil production concern mainly oil spills. The last serious oil spill occurred on 20 April 2010 in the Gulf of Mexico on the Deepwater Horizon oil rig owned by British Petroleum (BP) oil corporation. This tragedy is an accident that is considered the biggest marine oil spill since Ixtoc I oil release in 1979. According to the official data, eleven people went missing and were never found (“BP leak the world’s worst accidental oil spill,” 2010). The total discharge of oil was at 4.9 million barrels (United States Coast Guard, 2011). The flora and fauna of the Gulf of Mexico were intensively contaminated, which caused millions of deaths of animals, including dolphins and various marine birds (Viegas, 2013). Overall, the consequences of the accident caused numerous debates over a danger of oil production in the ocean.

However, according to the local U.S. District Court, the accident on the oil rig had been caused by the BP staff reckless conduct and negligence (Robertson & Krauss, 2014). Most of such accidents, not only oil spills, are primarily caused by the human factor. Modern oil production technologies, including those used by the Saudi Arabian industry, are safe and provide more than a reliable production process. The Kingdom’s state –owned oil monopolist and the biggest oil-production corporation Saudi Aramco successfully reduces its impacts on the environment, especially those concerning CO2 emissions. For example, during 2013, flaring at all Saudi Aramco facilities was reduced from 0.89 percent to 0.72 percent of raw gas production, placing Saudi Aramco among the top performers globally in flare minimization (Saudi Aramco, 2013). This example shows that oil can bring no harm to nature if it is wisely used and based on high modern technologies. Saudi Arabia, as a known world leader in this sphere, provides effective innovations in oil production process. Therefore, ‘Green’s’ accusations against oil production are not sufficient enough to consider them as flaws of oil. This is an important reason why oil is not a curse, but very considerable advantage.

Conclusion

Today oil is a primary source of energy and will remain as such for at least next few decades. Moreover, its consumption incessantly expands due to the further development of the world economy. At the same time, there is a demand for it on the world market, which means that main oil producers, such as Saudi Arabia, will greatly benefit from selling it to other countries. The biggest economies on the planet, like in the USA, constantly increase oil imports as well as enhance oil output from their own deposits. Oil is a considerable advantage; therefore, it is actually hard to call it a ‘curse.’ Even with several flaws like environmental pollution and dependence on market prices, it still gives many opportunities to develop economy and provide high standards of life. Besides, with the use of high technologies, it is possible to minimize environmental pollution and increase demand for oil for industry consumption, which will allow oil producers to avoid economic crisis. It is also a considerable source of filling state budget and increasing country’s GDP. Saudi Arabia has shown that oil can be very useful in terms of not only earning money but also spreading political influence. The Kingdom’s leadership in OPEC gives it an ability to influence oil market prices, not to mention that earnings from oil export covers all country’s needs in goods and resources not produced there.

Get a price quote
DMCA.com Protection Status