Impact of Oil on Middle East - 2475 Words

Impact of Oil on Middle East (Research Paper Sample) Content: Oil is hindering Development in the Middle East Region NameCourseInstitutionDate IntroductionOil or black gold is one of the natural resources enjoying a magnanimous level of treasure by the entire global community. Oil translates to into wealth immediately on discovery and exploration. The high value of oil in the world economy relates to it being the largest source of energy for driving industrial, transport, and economic processes. Fluctuations in supply and prices of oil in the global market work to shake economies of all world countries. Great world powers like USA, Britain, China and Russia have involved in endless struggles and cold warfare. The purpose of the struggles has been to achieve control over oil-rich areas to enable significant grip in the world political, social and economic affairs. USA has proved greatest hunger for oil considering its earlier strategized influence and dominance of the Middle East oil reserves and elsewhere perceived to have subst antial reserves of crude oil (Askari Taghavi 2006, p. 89). Due to the greater value of petroleum in the world economy, it is valid for one to assume that countries producing and exporting billions of gallons of crude oil are economically prosperous and enjoy significant internal development. Unfortunately, many countries known to produce oil, particularly in the Middle East suffer from sluggish if any major development. Despite its big value, oil has vehemently hindered development in the Middle East. Analysis and EvaluationOver a long time, since the discovery of oil, politics has assumed a central place in the exploration, drilling, and trade in the petroleum products. The politicization of oil has been due to great economic significance of oil, and it being the most depended source of energy. The focus on oil has been immense and concentrated to the extent that the deaths and destruction of properties result. The evil has been due to the struggles witnessed between groups of per sonalities or organizations to exercise exclusive rights over oil (Ahmed 2013). Efforts by politicians, autocrats and scientists to explore and find other sources of energy with the explicit intention of decentralize focus and dependence on oil have proved futile. Oil is too critical and sweet to ignore in favor of other sources of energy. Cordesman (2004, p. 15) elucidates that the national significance and importance of oil in oil-exporting countries of the Middle East is only possible under relatively democratic governance structure. In fact, countries like Qatar and Saudi Arabia that exercises relatively democratic governance with proper regulations for distribution of revenue from oil enjoy significant development. Unfortunately, the majority of countries in the Middle East experience, leadership that are opposite those of Qatar and Saudi Arabia. Consequently, bad oil politics drain and prevent revenues from oil from reaching all citizens. The entire effect is increased poverty , widening the gap between the rich and the poor, increased criminality and rebellion, and retarded development. One reason that Middle Eastern countries succumb to the negative growth in spite of the richness in oil relates to the over-dependence on oil that results in a phenomenon economists refer to as resource curse. This economic phenomenon refers to the inverse association between the abundance of natural resource and growth (Haddad 2011, p. 7). A close and analytical look at many Middle Eastern countries can lead to the conclusion that despite the vast oil potential, the countries experience negative growth and development. Many Middle East countries greatly depend on the oil industry and have failed to explore alternative revenue generating activities. Even though the dependency on oil might be due to the dry climatic conditions in the region, it has been economically unviable for the countries to focus on oil alone. It is due to dependency on oil that the countries suffer g reater impacts every time global prices for crude oil drop. Such slumps in the world oil prices, increase the rate of borrowing for most of the Middle East countries. The result is one of the strategies by regions powers to reduce international supply to cause a shortage, and subsequently increase oil prices (Cordesman 2004, p. 17). As the plan implementation take courses, the poor countries that also have lower quotas in the OPEC use debts to support basic economic activities and ignore expensive developments. It is worth to mention that the majority if not all countries of Middle East subscribe to Islam as the central religious culture. Islam has other divisions some of which teach hard stance. A good example is the Jihadist that seem to believe war resolves contentious issues (Yamaguchi 2003, p. 57). These kinds of teaching have led to the outbursts of outlawed and life threatening groups like Al Qaeda, ISIS and Taliban among others. For the groups to survive and conduct their te rrorist activities, they have tended to enter the oil industry, where they smuggle oil at cheaper prices to raise revenues. The money collected has worked to enable the group advance fights and terrorist activities against the governments of some Middle East states. The general consequences of the wars have been the destruction of properties, lives and escalating insecurity that frighten potential investors. Another reason for dwindling development in the Middle East relates to the concept of the rentier state. Rent in the terms of Adams Smith refers to the unrealized profits that usually reaped by those who have direct input to production the process of resources. Economic laymen can refer to rent as monopolistically generated profits (Ross 2012, p. 9). Rentier states are countries that exclusive depend on profits from oil rather than on surplus produced by its population. Ross (2012, p. 12) elaborate that entire states have political and economic powers concentrated in the hands o f a few individuals who usually constitute authoritarian governments. Rent seekers succeed in forming authoritarian system that supports their cause by weakening public institutions and suppress efforts to diversify the economy to create opportunities for poor populations that cannot directly access oil revenues. Renting enables the widening of public sector and encourages spending with little savings (Okogu 2003, p. 63). It also supports the existence and expansion of ineffective institutions and policies used as tools by the political class to enrich from oil. For better understanding of how oil has hindered the development in Middle East countries, it is imperative to carry case studies of particular states including Iraq, Syria, Yemen and Bahrain.The Case of YemenYemen is one of the Middle East countries that are rich in crude oil. The country also depended on oil for its economic progress (Schmitz 2012). It has been just recently that the country began to diversify its economy, but faces uncertainty due escalation in socio-political tension and strife. The dependence of Yemen on oil is currently ailing the country owing to the fall in production and scarcity of the natural resources such as water. Decline in oil production is threatening to lead to devaluation of Yemen Riyal, which will cause inflation and subsequently fan social tension and strife. Over-dependence on oil compromised government from identifying other tax areas. The government used oil revenues top offer subsidies to the citizens, who would riot every time subsidies reduced. The decline in Yemen oil sector relates to rising violence and labor strives fostered by harsh economic conditions and imbalanced distribution of national revenues. The reason for the worsening economic conditions, attributes of the authoritarian structure of the Yemen leadership, which has decided to silence despite the rising public tension. The government of Ali Abdalla Saleh faces accusations for betraying the spir it of national unity established during the unification of South and Northern Yemen. The failure to decentralize power and resources to the south, led to the development of the Southern Movement. The group later received the support of the Al Qaeda. The two terrorist groups currently work to compromise development gains realized immediately after the unification in 1994 (Scheumann 2008, p. 23). Since the leadership seems to benefit from the rents, there are few efforts to reshape the nature of the economy. The rents are also likely to be the reasons for the weak and inefficient institutions that only work to expand service industry while ignoring production sectors. The recent instabilities, which are responsible for the decline in revenues have escalated poverty margins in Yemen. Currently, about 42% Yemenis consume below $1.25 daily, which is an increase from 37% in the previous years. Global powers also have a direct impact on the underdevelopment of Yemen despite having oil. R emarkable instance, to stipulate the claim, was in 1991 when Yemen supported Iraq in the war against the USA. This move followed the review of the USA and allies foreign policy that saw the expulsion of about 800,000 Yemenis from the service industry in Saudi Arabia alone. USA also responded by cutting and withdrawing all aid remittances and agencies such as USAID from Yemen (Schmitz 2012). The Case of IraqIraq ranks fifth in the global list of countries with largest oil reserves and third largest oil producer in the Middle East. If not for the sake of petroleum, turning to the resource curse, Iraq would be one of the worlds richest economies. Unfortunately, the oil curse has worked to hinder socioeconomic and political developments (Askari Taghavi 2006, p. 82). Dependence on oil is one of the reasons for the dwindled development in Iraq. Over half of the countrys GDP, accrue from oil production a...