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4 pages/≈1100 words
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APA
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Mathematics & Economics
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English (U.S.)
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Topic:

Oil Price Plunge and the Middle East (Other (Not Listed) Sample)

Instructions:

Select as a case study any global economic event or events currently or recently covered in the news media and write a critical essay applying the concept points covered in any module (or modules) of the course. If possible, select an event that has had an impact on the Middle East.
The thesis or point of each student essay will be to evaluate alternative propositions for economic choice by one or more individuals, firms, organizations, or governments applying one or more of the economic theories provided in the course.
Students should use and cite at least four published sources to support their positions and analyses in addition to citing at least one discussion of economic theory in the Carbaugh textbook. At least two of the sources should be written by economists (they can be writing in news media or academic journals), and at least two of the sources should present arguments or perspectives that differ from or oppose each other.
Text book: Carbaugh, R. (2013). International Economics (14th ed.). Mason, OH: South-Western, Cengage Learning. ISBN 13:
9781133947721
Module 1: Globalization and the Foundations of Trade in Economic Perspective
Module 2: Comparative Advantage - Sources of
Module 3: Comparative Advantage – Challenges to
Module 4: Introduction to Barriers to Trade
Module 5: Introduction to Barriers to Trade
Module 6: Trade Regulations and Policy
Module 7: Modernization of Trade Regulations and Policy
Module 8: Regional Trade Arrangements
Module 9: International Factor Movements and MNEs
Module 10: Balance of Payments
Module 11: Foreign Exchange
Module 12: BOP Adjustments
Module 13: Exchange Rates
Module 14: Macroeconomic Policy and International Banking

source..
Content:

Portfolio Project (International Economics): Oil Price Plunge and the Middle East
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Background
The recent plunging oil prices from June 2014 has highlighted the fragility of oil dependent countries, since, oil is the biggest component of revenue. The effects of declining oil prices in the Gulf Cooperation Council Countries GCC countries are likely to increase government borrowing to continue with government spending in the face of falling oil revenues. This further highlights the impact of oil prices on the balance of payments in the GCC countries, and the need for diversification as a strategy to improve their economic outlook. The GCC growth approach has focused on using oil revenue to improve infrastructure, education and health while also increasing employment in the public sector (IMF, 2014). Nonetheless, there is exposure to volatility of oil prices that undermines this growth approach that would be more sustainable when oil prices decline over time.
The Middle East and oil prices
The plunge in the oil prices has affected the revenues and budgetary allocation in the GCC countries, which rely on petroleum on economic performance. Crude oil is an important product to the economies of the GCC countries in the Middle East. Hence, account balances of these are running low and there is pressure for the countries to diversify reform the oil based economy. Saudi Arabia has typically been relied upon by these countries to give balance in the global oil production output and prices. Hence, the OPEC polices closely mirror the strategic interests of Saudi Arabia and to an extent the other OPEC countries.
Oil prices changes and the global economy
Since the 2014 to 2015, the oil price has plummeted to more than half what it was. This has been the unusual since the past decade the prices of oil per barrel has been high. This has especially been because of increased oil consumption buy China with increased oil demand commensurate with the rising Chinese economy. At the same time, conflict in oil producing areas like Iraq has meant that concerns about the supply of oil has resulted to high oil prices, and the conventional oil wells could not feed the oil appetite resulting to higher prices. An increase in exports revenues improves the balance of payment as they are receipts from foreigners (Carbaugh, 2013).
However, this increased incentives for more oil production in the US and Canada from shale wells and tar sands. At the same time, the European economies started to slow down, meaning that there was increased oil production from North America, while the major western economies were tapering off (Plumer, 2015). As such, the plunge in oil prices from 2014 to 2015 can directly be attributed to the higher supply compared to the demand. There was expectation that the OPEC countries would possibly intervene to reduce production, but this never materialized. The rationale was that this would result to a scale down in operations in the oil shale areas of the U.S, but the ramifications in the Middle east have been disproportionate as the GCC are oil dependent (Plumer, 2015).
Oil price and the GCC economies
The tensions in the GCC area and as a result of disparity in the level of oil revenues where the larger countries including Saudi Arabia are better placed to deal with the negative impact of plunging oil prices. On the other hand, smaller countries including Bahrain and Oman are hard hit by the falling revenue (Middle East Eye. Net, 2015). Even though, there has been no cut to the oil production, there is concern that trade imbalances will affect social services and spending negatively. The OPEC countries major producers in the GCC seemed to be more preoc...
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