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The Economy of Oil & Gas in UAE Essay


UAE is one of the largest producers of oil and natural gas. According to Taib, in 2009, UAE was the 8th largest producer of oil in the world. In the same year, UAE had the 4th largest reserves of natural gas (Taib). Around forty years ago, UAE was among the poorest countries in the world.

However, after the discovery of oil, UAE’s economy was transformed within a short period. At the moment, it is one of the richest countries in the world. According to the Complete Resident’s Guide, “UAE is the second richest Arab country, after Qatar, on a per capital basis” (4).

The guide also reiterates that UAE has an annual GDP growth rate of around 10%. However, due to fluctuations in oil and gas prices and the realization that an economy based on oil and gas might not be sustainable, UAE has diversified its economy. Therefore, other economic sectors play a huge role in UAE’s economy at the moment. This essay provides an insight into the effects of oil and gas on UAE’s economy.

UAE has large onshore and offshore reserves of oil and natural gas. According to Shihab, UAE growth has been dependent on oil and gas since its formation in early 1970s. In 2009, UAE boosted nearly 7.3 % of world’s total oil reserves and was ranked 8th in the production of crude oil (Taib).

At the same time, it was estimated that UAE had 1.6% of the world’s proven natural gas reserves. For that reason, it is believed that oil and gas will continue to be the backbone of UAE’s economy for a long period of time. Most of the oil and natural gas reserves are in Dubai and Abu Dhabi (Shihab). These two emirates have, therefore, made UAE an important player in the world’s oil industry.

. “Economic development can be perceived as change in the structure of an economy” (Shihab 4). Likewise, oil and gas have greatly transformed the structure of UAE’s economy. Before 1970, UAE’s economy was slowly driven by agriculture. Moreover, in the late1950s and early 1960s, UAE was an underdeveloped country. “Its inhabitants were nomads, pearl divers and fishermen” (Shihab). Interestingly, the ruler’s fort was the only significant building in Abu Dhabi city.

Moreover, roads and other basic infrastructures were missing. However, after 1970, oil and gas propelled the economy in a rate only seen in a few countries worldwide. Abu Dhabi is now a world class city and UAE income levels match those of developed countries. This transformation has been brought about by forty years of a flourishing oil industry. Furthermore, UAE skipped the hypothetic development stages that most countries go through before attaining the status of developed countries (Shihab).

It is believed UAE’s enormous oil and natural gas reserves enabled it skip these stages. Before the year 2000, UAE’s development strategy was inclined towards resource-based industries (Shihab). For instance, after the discovery of oil in Dubai, its infrastructure was developed solely from oil revenues. Therefore, UAE embraced an industrial strategy that strictly depended on the utilization of natural resources (Shihab).

UAE utilizes the latest technology to increase efficiency and productivity in its oil and gas industry. According to Shihab, it has the capacity to produce two million barrels a day. This is the maximum production that can be sustained in one day. However, if the current rate of production is maintained, UAE’s oil reserves will only last for just over a hundred years (Shihab). Reliance on oil and gas has also impacted negatively on UAE’s economy and that of other countries in the Gulf region.

A study by Arouri, Lahiani and Bellalah showed that stock markets within the Gulf region reacted strongly to fluctuating prices in the oil industry. This study also concluded that the economic slump witnessed in UAE between2008 and 2009 had a relationship with fluctuating oil prices. Nonetheless, oil is not the only source of revenue for UAE. In 2004, oil only accounted for thirty two percent of the total GDP (Complete Resident’s Guide 6).

For that reason, other economic sectors such as trade, manufacturing, housing and tourism played an important role in UAE’s economy. In addition, some emirates, within the federation, are not content with their oil and gas success (Mandel). For instance, Abu Dhabi has embarked on a mission to diversify its economy. In doing so, Abu Dhabi hopes that oil proceeds will only account for less than half of its GDP after 2015 (Mandel).

It can be concluded that oil and gas are important elements of the UAE’s economy. Huge reserves of oil and natural gas propelled UAE from a least developed country to a developed country in no time. However, some emirates, within UAE, such as Abu Dhabi have realized that an economy based on oil and gas is not sustainable.

For instance, it is predicted that wells in UAE might dry up in a hundred years time (Shihab). For that reason, UAE economy is currently being diversified. Accordingly, other economic sectors such as housing, trade and tourism are being developed.

Works Cited

Arouri, Mohamed, Lahiani Amine and Bellalah Makram. “Oil Price Shocks and Stock Market Returns in Oil-Exporting Countries: The Case of GCC Countries.” International Journal of Economics and Finance 2.5 (2010). Print.

Mandel, Jen. “.” New York Times on the Web 19 April. 2010.

Shihab, Mohamed n.d., Economic Development in the UAE. PDF file. Web.

Taib, Mowafa 2009, . PDF file. Web.

The Complete Resident’s Guide: Dubai. Dubai: Explorer Publishing & Distribution LLC, 2006. Print.

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IvyPanda. 2019. "The Economy of Oil & Gas in UAE." August 9, 2019. https://ivypanda.com/essays/the-economy-of-oil-gas-in-uae/.

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