“Middle East Oil in Uncertain Times” is a presentation by Bassam Fattouh, which is dedicated to the specifics of the dynamics in the global oil sector. The presentation reviews the most recent trends in the sector, provides illustrative examples, and makes relevant suggestions on the potential responses of the countries of the Middle East. In general, the presentation highlights the importance of adjusting to the changes in the sector and suggests that diversification is the most appropriate but rather challenging solution for the Middle East.
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The presentation clearly establishes the importance of the Middle East as the key oil supplier in the modern world, even though the statistics show that its market share has been shrinking (from 55% in 2005 to 47% in 2015) (Fattouh 4). Also, the Middle East dominates the sector from the perspective of crude oil export, and it supplies oil to the Asian region, including China, which is a major consumer (Fattouh 7-8). This fact remains true despite the conflicts that have shaken the region, significantly reducing the production in a number of its countries.
The presentation also demonstrates that the oil sector remains an attractive business area. There is an ongoing increase in oil demand, and various forms of transport, including cars, seem to be responsible for it. As a result, the presentation connects this increase with the global expansion of the middle class, which implies that car ownership experiences a similar increase. To sum up, the natural reserves of the countries of the Middle East ensure their ability to be the major players in a very attractive sector of the global economy.
However, the attractiveness of the sector also implies competition. In particular, Fattouh demonstrates that the US is a strong player in the market with a short investment cycle, rapidly growing production rates, and increasing importing rates that reach countries all over the world, including China (22, 26). Thus, the countries of the Middle East may experience some difficulties in upholding their domination in the long term.
Moreover, another issue of the sector consists of the fact that the plunge in oil prices has set new conditions which the worldwide oil industry needs to take into account. Fattouh offers several possible response strategies, which include short-term solutions like borrowing funds or selling assets as well as more long-term decisions like the rationalization of expenditures (29). Still, Fattouh points out that all of these solutions have their costs, which complicates their choice.
Another long-term threat to the oil industry is climate change policies. Despite the fact that the oil demand has been growing, the long-term forecast suggests that it will eventually slow down, and the main reason for this decline is expected to consist of climate change policies (Fattouh 33). Fattouh mentions potential solutions, including those producing short-term results (like raising or decreasing oil prices) and states that economy diversification is the best option, which, however, is not easy to achieve. As an example, Fattouh demonstrates that Saudi Arabia’s Vision 2030 contains important diversification goals, but the energy sector goals appear to be isolated from the rest of the economy, which is unlikely to bring positive results.
According to Fattouh’s conclusion, the oil sector is rapidly changing, and its future is uncertain, which makes the diversification efforts particularly important for the Middle East as the key suppliers of the resource. However, Fattouh finds little evidence to the success of previous diversification efforts. I agree with the fact that diversification is a complex and prolonged process, and I also think that the isolation of the energy sector is likely to slow it down, but I believe that diversification is inevitable in the present situation. I suppose that the mentioned issues have spurred diversification efforts, which should result in positive outcomes for the economies of the Middle East.
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Fattouh, Bassam. “Middle East Oil in Uncertain Times.” Business and Economics Lecture, May 2017, Emirates Diplomatic Academy, Abu Dhabi. PowerPoint Presentation.