the Petroleum Industry Oil Is Not Only the Most Widely Traded Commodity in the World
Oil is not only the most widely traded commodity in the world but it is also a major source of revenue for many countries especially the Gulf Cooperation council (GCC) countries.
Morococo, Morocco, December 20, 2015 (Newswire.com) - Over the past few years, the prices of petroleum oil have continued to fall to levels not experienced since 2009. This decline in the price of petroleum oil is good and bad news for different economies. For net importers of oil and many developing countries that rely on fuel as a major component of energy this is good news. However, for oil exporting countries, especially the GCC countries that are highly dependent on oil exports as a source of government revenue, the declining prices are bad news. This is because these countries risks of running budget deficits, slashing government spending, reducing employments, and increasing taxation rates. On the other hand, developing countries will be able to have positive balance of payments in case their major imports were petroleum products. Additionally, expensive infrastructural projects reliant on oil will now be rather cheaper than it was the case. Several proposals have been put forward to try to explain why oil prices have continued to decline over the past three years. Among the suggestions put forward are: Declining united states imports from OPEC (Organization of Petroleum Exporting Countries), GCC, and the middle east in favor of domestic production and Canadian imports The reluctance of OPEC to take any action in the midst of declining oil prices Increased production capabilities by Saudi Arabia Saudi Arabia has individually been blamed by some of the GCC countries for trying to use oil as a weapon on two fronts. First, the country is being accused of using increased output as a weapon to weaken its foes Russia and Iran. Secondly, it has been accused of trying to use increased production as a strategy of increasing its market share in areas formerly dominated by United States firms. According to many industry experts, there is a huge likelihood that the prices of petroleum oil will continue to decline for some few more months. That is why many experts are advising countries that are highly dependent on oil exports such as Oman to seek ways of diversifying their economies. This is because, failure to do so, might lead to further budget deficits, and all the gains made during the boom years might soon be wiped away by increasing inflation, huge internal and foreign debts, as well as a deterioration of the standards of living.