• Arabian Business
• About Us
• The Map
• Resources
• Contact Us

What Will Peak Oil Do To The Arab Business World?

Many predictions have been made about the effects of peak oil on the Arab business world, but there are many factors that will determine the exact effects, including the date when peak oil will be reached and the development of alternative energy sources.

Peak oil will occur when the maximum rate of oil extraction is reached. Oil is a finite resource, so the rapid increase in oil production that occurred during the 20th century cannot continue indefinitely. After peak oil, production will decrease, but there has been a lot of debate over when this decline will occur.

Some people have suggested that peak oil has already been passed in the non-OPEC countries. Peak oil is generally considered on a global basis, but peak production can also be reached in a particular region, country, oil field or well. Some estimates have suggested that the global peak may already have occurred, while other estimates suggest that it may occur at any point up to or beyond 2020. However, changes in the demand for oil or the development of new methods of extracting oil may defer peak oil. As well as the idea of peak oil as an effect of a decline in the availability of oil, it has also been suggested that peak demand may be reached as concern about oil production and the environment stimulate the development of cleaner sources of energy.

Once peak oil is reached, it is expected that oil prices will rise as the supply declines. This could have serious detrimental impacts on industry and the global economy, particularly in the nations that rely on large imports of oil. However, the price is expected to begin to decline eventually, as demand declines, either because of the economic effects or due to an increased use of alternative energy. The supply of oil would continue to be in decline, however.

Since much of the Arab world depends upon oil as the mainstay of its economy, it will be affected by the decline in this key industry as well as by the decline in the availability of oil and the increasing prices that will affect industry and energy use everywhere.

Oil has been responsible for rapid increases in wealth in the Arab world. After the discovery of oil, many Arab countries experienced rapid economic growth, which was often associated with significant improvements in quality of life.

Many Arab nations are currently experiencing significant increases in domestic demand due to industrial development and increasing populations, and their reliance on desalination to provide clean water. Energy consumption in the UAE is expected to double by 2020. A combination of increasing domestic demand and peak oil may cause Arab oil producers to reduce their exports in order to safeguard their own supply. This could protect Arab businesses against the initial effects of peak oil.

The increasing oil prices associated with peak oil could initially be beneficial for the Arab business world, although oil producers would no longer be able to increase supply in order to take advantage of the higher prices. The OPEC nations, particularly Saudi Arabia, are, however, in a strong position since they are still able to manipulate their supplies in response to demand and oil prices. However, it is expected that even Saudi Arabia will be unable to continue at the current rate of production, with the decline expected to begin within the next ten years, or at least in the next few decades. This will have a serious impact on the oil-based Saudi economy and its influence.

The Arab business world is likely to experience less of the initial impact of peak oil that business elsewhere since the Arab world will be in a better position to continue providing its own domestic supply of oil and because the reserves in Arab countries are expected to be among the last to reach their peak. This will enable them to take advantage of rising prices. However, as the world economy begins to suffer due to higher oil prices and difficulties obtaining enough oil, Arab businesses that export materials and products other than oil will suffer.

The oil companies in the Arab world will begin to experience more of the negative effects of peak oil as their own reserves begin to run out. Oil production will decline eventually, as the oil reserves are depleted and as exports to other countries decrease. The price of oil will probably drop as people, stimulated by the increasing difficulty of obtaining affordable oil, turn to alternative sources of energy instead.

The decline in oil production will have a serious impact on the Arab oil companies, and the loss of these important players in the economy of the Arab world could have a serious negative impact on all Arab businesses. However, many Arab countries have begun to diversify their economies in order to reduce their dependence on oil. This will help them to cope with peak oil, although the expected decline in oil production and therefore in the economy will be difficult to counter completely.

The Arab world will also need to develop its own alternatives to oil. The Saudi government has shown an interest in developing alternative sources of power, using nuclear and renewable energy to ensure a stable domestic supply, even without oil. Other Arab countries such as Kuwait, Abu Dhabi, Qatar and the UAE are also interested in developing nuclear power. Nuclear companies from Europe, America and Asia are competing for the rights to build nuclear power plants in the Arab world.

ArabCin.net Arabian Business

Home | Contact