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International Relations
The Middle East continues to play a critical role in the global supply of oil. Since the 1970’s, the Middle East has accounted for the highest percentage of the global oil supply averaging at 55%. Although nations such as Russia and the United States also produce large amounts of oil, most of their oil is normally consumed domestically. The Middle East is therefore expected to continue playing a critical role in the supply of energy for the Asian economies that are experiencing exponential growth and demand for oil. Moreover, although oil production in the United States was associated with high operational costs, technological advancements have enabled the country to now produce high quantities of oil at relatively low prices. As a result, the United States has decreased the quantity of oil imported and steadily shifting towards becoming an oil exporter. Countries such as Nigeria that normally exported their oil to the United States are therefore shifting towards other markets and especially the Asian economies. Over the recent decades, the oil market has experienced a lot of disruptions in oil supply due to political conflicts in some of the major oil producing nations such Iran, Iraq, and Libya. Saudi Arabia is considered to have the second largest oil reserves in the world, which are estimated to be approximately 268 billion barrels. The nation has been able to quickly offset the disruptions in oil supply, especially during the Arab spring. One of the critical aspects that characterize the major oil producing nations in the Middle East is their over reliance on oil as the main source of national revenue. The national economies of these countries are therefore directly impacted by changes in global oil supply. Moreover, nations such as Qatar that rely on oil as the main source of revenue are facing grim futures due to the limited nature of their oil reserves. These governments are therefore investing heavily in other sectors such as tourism and marketing the countries as investment hubs in the effort of cushioning their economies from the risks associated with relying on oil revenue.
Currently, the global supply of oil has increased significantly in comparison to the existing demand resulting in the fall of prices. Consequently, the countries that heavily rely heavily on oil-generated revenue have experienced adverse economic impacts. This has resulted in a mutual agreement by all OPEC nations to put in place measures aimed at stabilizing the global oil prices with the main one involving controlling the amount of oil supplied to the global market. By decreasing the amount of oil supplied to the market, the OPEC nations have been able to partially stabilize global oil prices that were previously in free fall.
Additionally, the global oil market is experiencing significant changes due to technological advancements and the shift towards renewable sources of energy. Many nations have invested heavily in alternative sources of energy such as wind energy, nuclear energy, and solar, with the aim of decreasing their reliance on oil. Additionally, manufacturing companies and automobile firms, in particular, have invested in the development of ecologically friendly vehicles that use alternative sources of energy such as hydrogen and electricity. Therefore, it is important for the major oil producing nations to consider alternative sources of investment because the feasibility and lucrative nature of oil production in the future is under threat.