The situation reversed, as ASK (Kingdom of Saudi Arabia) was successful in discovering the largest oil reserves of the world in the country which made it one of the world’s richest economy and lined it among the powerful nations of the world (Guru, 2011). Throughout sass’s and offs Saudi Arab’s followed a path of rapid economic development (CNN, 2006). Petroleum liquids take up to for more than 90% of the country exports and about 75% of government revenues are Saudi Arabia became one of the fastest growing economies in the world.
The absentia surplus they accumulated as profits by trading oil was used to improve infrastructure of the country and considerable development was made possible as the country became a hub for foreign investment. (Saudi Arabia: Economy, 2011) A. Exploring the Oil in ASK The process of discovering oil was initiated by King Bad al-Aziza AAA Sad’s who signed an oil concession agreement with Standard Oil Company of California (US). Up till that moment there was no evidence of oil reserves in ASK. American geologists began detail work on geological structure in Saudi Arabia and soon started the process of exploration.
They first started desert exploration and then started drilling the ground for oil. In 1935, by effort of professional American wildcatters and locally trained Arab helpers the first oil well reserve was discovered and was named as Dammar No. L . The same year, Dammar No. 2 was drilled. In a few months, Damn rolling program expanded and by the mid of the same year Damn No. 3, 4, 5 and 6 were authorized to be drilled. As the deed was done, the results brought a haze of disappointment to the drilling program.
The first well they discovered was initially not considered as a read achievement, as the flow was only 100 barrels a day, which wasn’t deemed worthy of commercial production. Dammar No. 2 gave a positive outlook to the much disappointed geologists and wildcatters. The test results showed that the well was able to support 3840 barrels a day which however fell to 255 barrels in a week. Same was the result with No. 3 as it never flowed more than 100 barrels a day. No. 4 was a complete disappointment, as it was nothing but a dry hole. Similarly No. 5 and No. 6 didn’t yield much oil to base commercial production on it. World, 2013) Soon after Damn No. Was drilled in but the process was troublesome as it was the deepest well authorized to be spurred in. By 1937, the drill was dug deeper and deeper as the tests results kept claiming no oil. In 1938, the effort of Standard Oil Company of California which was later named as ARMCO (Arabian American Oil Company) was met with success as Dammar No. 7 flowed to a consistent rate of 3690 barrels a day. (World, 2013). From this point onwards various oil extraction sites were uncovered most located in Eastern Province; Graham and Safari being the largest onshore and offshore oil fields respectively.
B. Middle East Economy Middle East accounts for over 40% of world oil exports worldwide and a small disruption in oil supply from this region can send the world economy spiraling down the hill. Shortly after the first oil well was discovered in Iran, the period of oil excavation began in the Middle Eastern countries especially Saudi Arabia, Iran, Iraq, Kuwait, the United Arab Emirates, and Qatar. These nations of the Third World gained considerable power to exert influence on the modern society as well as the politics of the world. 1 .
Middle East economy before ICC union The economy of Middle Eastern countries is defined by a period of rapid economic growth from 1965 to 1985. This rapid growth is generally attributed to the dramatic oil price hike in 2973 owing to Yon Kaput War (Arab-Israel Wars) and Iranian Revolution. Not only Gulf oil producing countries benefited major from the additional revenues brought about by dramatic rise in prices but also the non-oil producing Middle East countries for example Jordan, Egypt, Yemen flourished owing (Lucian, 2010) 2.
Middle East economy after ICC union Gulf Cooperation Council was signed between United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait on 1981. Post 1986 is the era of decline resulted into a decrease in price due to overproduction of oil. Consequently, the foreign export revenues plummeted and adversely affected all the Middle Eastern countries. (Lucian, 2010) Currently, the economic well-being of Middle Eastern countries is in question because of geopolitical unrest as well as stress exerted on the resources by ever growing population.
The population growth rate of Saudi Arabia is approximately 3. 5% annually. (cob, 2012) II. GLOBAL MARKET A. Global Market before and after Saudi Oil Exploration Before Saudi Oil exploration and formation of OPEC, the world oil market was ruled by the West (TATS, 2013) . In the period that followed entire process was vertically integrated by various multinationals, independent local firms and contractors working interactively with no geographical boundaries playing its part to withhold oil supply; oil fields were not nationalized and home government had minimal authority over the trade of oil.
The prices were determined by supply and demand factors and were not hauled by one leading monopoly like OPEC as it is today. After 1960, during which Saudi Arabia started developing set up production plants considerable steps were taken by OPEC members to take hold over their domestic oil industries. As a result they acquired greater influence on pricing of oil on world market. On two occasions in the ass’s the crude oil prices rose sharply. First due to Arab Oil Embargo in 1973 quadrupled the oil price and then due to Iranian Revolution in 1979.
Prices fluctuated less dramatically in the following decades. (Blacker, 2013) B. Current Position of Global Oil Market In the early sass’s OPEC incorporated a price band mechanism to closely match emend and supply and to avoid dramatic fluctuations. However, in 2004, speculation by the brokers and black market dealings changed the significantly unperturbed global oil market by escalating the prices. In 2008, crude oil prices soared once again making world oil market as volatile as ever. (OPEC, 2013) C. Worldwide Oil Consumption 1.
Comparison between COED and Non-COED Countries The COED (Organization of Economic Cooperation and Development) countries which include, USA, Europe and other advanced countries make the largest portion of demand for ASK petroleum liquids. COED countries consumed an overall of 53% of total world’s oil which is much greater than Non-COED countries. It is because developed countries having much sophisticated transportation system and higher vehicle ownership burn more oil which leads up to higher level of oil consumption.