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Research has for a long consistently shown that overdependence of the natural resource tends to be critically associated with lower growth of economies of such countries. However, the consideration of this hypothesis there no crucial difference in countries that greatly depend on oil exportation especially the OPEC countries. Therefore, as a result of this universality among the oil producing and exporting countries it becomes necessary to re-evaluate the reasons why such a phenomenon is experienced. Moreover, previous studies on this field indicates that there is a clear evidence linking the oil resource exportation-dependent countries with slow economic growth even after various factors are controlled (Awokuse & Clifton, 1994).
In addition, the oil exportation dependency provides a barrier to the E-government since countries that heavily depend on the exportation of natural resource such as the oil have over a long time poorly performed on various economic and social measures as well as political development leading to a phenomenon often referred to as the resources curse. This has been due to numerous conflicts that hinders implementation of effective economic policies (Sturm, Gurtner & Gonzalez, 2009). However, irrespective of this the oil natural resources are likely to be the ultimate road to development in most of the oil producing countries. Hence, this necessitates for the embracing of sound economic policies and good governance which are the crucial variable that can be used in mitigating these effects (Jones, 1990).
Rapid growth in domestic consumption of oil among OPEC countries
The export rate are nowadays reducing among the OPEC countries due to increased levels of consumption in comparison to previously. For instance, most of the OPEC member countries usually survive on the revenues obtained from oil exportation which in most cases results to the eroding of the exportation capacities as a result of domestic consumption subsidization. The OPEC oil producers and exporters have approximately generated an estimated $5 trillion in oil-exportation revenue since the year 1998 which is a very sizeable amount of money. However, this money is usually not adequately accounted for or reflected in the levels of domestic development among the OPEC countries (Cremer & Isfahani, 1991).
Therefore, irrespective of ensuring that the OPEC member countries citizens are weaned off the subsidies allocated on the oil, it is likely that the OPEC organization will reach a point whereby it will not be able to increase the oil price of oil without directly or indirectly harming its oil exportation revenues (World Bank, 1992). However, for the time been that barrier is actually some way off, but likely to cause the effects soon, therefore OPEC should take heed in advance. This is mainly because the subsidies are likely to continue increasing with the increase in the levels of consumption among these countries (Sturm, Gurtner & Gonzalez, 2009). Moreover, this rapid growth in the domestic consumption of oil has greatly lowered the rates of export rates in most of the OPEC countries. Thus, as the average of global growth of oil demand average 1.2% per year, the demand in many OPEC countries grew by almost double the global rate a trend that can be accounted by the heavy subsidization which is effected through low retail prices within the OPEC countries. For instance, the demand in Angola, Qatar, and the UAE grew by more than 5% per year, closely followed by Kuwait, the and Saudi Arabia whom their growth rate was 4.7% per year (OPEC Annual statistical bulletin, 2010). This is a trend which must be addressed to ensure that there is likelihood of exhaustion of the oil resources.
Oil exportation statistics among the OPEC countries
The OPEC member countries annual revenue approximately totalled $103 billion in the year 1998 and has been consistently growing over the up to 2008 when the export values dropped due to global economic financial crisis. However, under normal circumstances the oil export rates increases exponentially to cater for the increasing demand worldwide. However among the OPEC member countries Saudi Arabia happens to be the largest export with the least one been Ecuador (OPEC Annual statistical bulletin, 2010). Hence, Saudi Arabia is always a very key stake holder in the determination of the global oil prices. However, the statistics provided below that were adopted from the OPEC Annual statistical bulletin for five years indicates a continuous increase within the four years except 2009 which was hardly hit by global financial crisis.
Table 1: OPEC Member countries values of petroleum exports in million dollars
|SP Libyan AJ||28,300||35,700||40,400||54,175||31,377|
Fiscal policy among the OPEC countries
Fiscal policy choices that have been pursued by the OPEC countries have significant impact on economic performance in these countries. This is mainly due to the fact that the oil sector importance in the economy as well as because in most OPEC countries the oil revenues are directed to the government (Ezzati, 1978). However, the fiscal policy in most of these oil-centred economies is actually facing numerous challenges, both in the long run, due to the fiscal sustainability and intergenerational equity as well as in the short run, due to the fiscal planning and macroeconomic stabilisation. Moreover, most of the institutional responses to particular fiscal challenges among the OPEC countries mostly involves the budget’s conservative oil price assumptions, the oil stabilization establishment as well as savings funds and the fiscal rules (Awokuse & Clifton, 1994).
In addition, the fiscal policy in most of the OPEC countries has been expansionary for some time as a result of increasing oil prices (World Bank, 1992). Therefore, the fiscal expansion has greatly added to inflationary pressure, thereby constraining the monetary policy in tackling inflation due to drastically changing exchange rate regimes. Therefore, from this perspective fiscal policy is actually the major macroeconomic stabilisation tool, however, it has constantly faced competing considerations and objectives (Jones, 1990). Hence, cyclical considerations usually warrant fiscal restraint, but, at times when the oil prices are high, pressure toward increasing public spending mounts. However, such pressures actually stem from the distribution-related considerations, spending needs that are development-related such as in the areas of social and physical infrastructure as well as international considerations which may include global imbalances (Cremer & Isfahani, 1991). However, the sharp fall in prices of oil from 2008 poses the challenge of whether oil exporters will be able to sustain their spending levels that had been reached in previous years.
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