About three decades ago, United Arab Emirates was among the least developed countries in the world. The country used to rely heavily on subsistence agriculture, nomadic animal husbandry, fishing, and seafaring. However, since the discovery of oil in the late 1950s, the country’s economy has grown tremendously and it has achieved income comparable to the most industrialized countries in the world.
The discovery of oil made sure that the country did not have to go the gradual economic growth route that other countries had gone through to become fully industrialized. With the demand of oil products increasing and the prices of oil products remaining high there was no way to stop the economy from the fast growth rate.
The United Arab Emirates entered to the 20th century with the discovery of oil in the Abu Dhabi in the year 1958. Subsequent discoveries which followed were in the Dubai and Sharjar in the 1960s.
Oil was first discovered in Abu Dhabi in 1936 by a British oil company, which had been given the rights to search for the oil by the government but it was not until 1958 that the company discovered huge oil volumes, which were enough for trading and exporting. In 1962, the exports of crude oil began to bring the trickle of what has now become a major oil producer in the world.
Since then, oil has brought unimaginable wealth and transformed a society that was never changing into among the world’s fastest growing economies and the fastest in the Middle East. All this unimaginable growth has been brought about by petroleum production and exports.
Evidence shows that the United Arab Emirates “possesses the fifth largest oil reserves in the world, and the fourth largest reserves of natural gas. Production is around 2.8 million barrels of crude per day, and there are plans to raise it to 4 million bpd by 2010” (Daily Telegraph 1).
Unconfirmed sources estimate that the oil reserves may last for the next 92 years if the current production level remains at that. According to another survey conducted by global oil major British Petroleum (BP) titled 2008 BP Statistical Review of World Energy, the United Arab Emirates proven oil reserves stand at “97.8 billion barrels and this accounts for 7.9 percent of the world’s total reserves of 1.24 trillion barrels” (British Petroleum 22).
The economy of the United Arab Emirates is characterized by a high per capita income due to the high revenues gaining from oil exports. There have been efforts to diversify the economy so as to reduce the proportion contributed by oil since it’s a major economy player contributing approximately 25% of the country’s GDP. Over reliance on one product for a country growth is always risky as price declines of the commodity can affect the economy badly.
Since the discovery of oil, the United Arab Emirates economy has grown from the small unrecognized desert it used to be to a leading economy in the Asian region. The country uses the revenues gained from oil in increasing its spending on the infrastructure expansion and employment creation. There are also continued efforts to open up the economy for more private sectors participation as this will make sure the economy grows further.
The previous economic crisis, which the world was suffering and still recovering from, caused a 4% drop in the GDP but the country is employing every effort possible by increasing its spending and increasing liquidity to its banks (World Fact Book of the United States Central Intelligence Agency 1).
The inflation rate in the United Arab Emirates has always remained at the low levels of “1.3 to 3.2% during 2000 to 2003” (Anon 3). The Consumer Price Index rate of inflation was down to “1% in the year 2009” (Anon 3). This has been attributed to the country’s wise economic decisions. The high oil prices and the latest increase in oil production have boosted the business confidence and the successful economic growth of the United Arab Emirates; as a result foreign investors have started streaming in.
The high oil revenues has enabled the country diversify its economy to other sectors, such as, infrastructure and tourism thus creating employment through reversal linkages. Despite these efforts to diversify the economy drivers, the oil industry offers wide employment opportunities that are better paying compared to the jobs in the other sectors.
The sector is an employment generator since it serves a wide job market pool. The job seekers range from skilled, semiskilled to tradesmen, from engineering to technicians. The country workmanship is relatively poor and semi skilled and thus relies most of the time on imported labor to serve its economy. To increase the economy growth further, the government has initiated plans to enrolling international students studying in the country for part time jobs.
We can conclude that oil production in the United Arab Emirates has contributed greatly to the growth of the country’s economy and with oil products being non renewable, the country has initiated strategies to reduce its over reliance on oil and making an all round economy by investing in other sectors of the economy.
Anon. “United Arab Emirates – UAE.” Gulf base, 2009. Web. 16 Dec. 2010.
British Petroleum. “BP Statistical Review of World Energy.” Beyond Petroleum, June 2010. Web. 16 Dec. 2010.
Daily Telegraph. “United Arab Emirates.” Daily Telegraph, 2007. Web. 16 Dec. 2010.
World Fact Book of the United States Central Intelligence Agency. “United Arab Emirates Economy.” Information Technology Associates, 2010. Web. 16 Dec. 2010.