The Effect of Oil and Gas on Qatars Economy - Research Paper Example

The Effect of Oil and Gas to Qatar’s Economy INTRODUCTION The oil and gas sector of a country play a decisive role towards developing its economy at large. From the current scenario, it can be apparently observed that for the oil producing nations, exports are generally made in terms of petroleum and natural gas products that form the major share of earned revenues. For instance, nations such as Kazakhstan, Kuwait and Qatar earn about 60 to 70 % of total governmental revenue from their respective oil and gas segment (Central Intelligence Agency, “The World Factbook”). Apart from earning substantial revenues from exporting various products, every industrial giant within these nations consume massive amount of oil in order to maintain smooth functionality in the operations and thus contribute to the overall economic development of the nations. In terms of Qatar’s economic condition and position, recent reports project that the nation experiences a real growth rate of about 5.5 % and is ranked 44th position in terms of world ranking. The per capita income of this nation was $102,100 in terms of world ranking till the year 2013. Observably, the nations is ranked 3rd in terms of gross national savings, 19th in terms of crude oil production and 6th in terms of natural gas production (Central Intelligence Agency, “The World Factbook” ). Research Question and Hypothesis. The research questions of this study are determined hereunder, What are the effects imposed by the oil and gas segment on Qatar’s economy? What are the effects of raising or lessening dominance of this particular sector on the economic position of Qatar? By taking into concern the findings of this particular study, the null hypothesis to be tested in this study will be, “The oil and gas segment has no considerable impact on Qatar’s economy has been validated”. Research Evaluation Technique. The information accumulated from the research work certainly helps in determining the validity of the above-depicted null hypothesis. It can be affirmed that the research question is mainly structured with the intention of understanding that how oil and gas sector being the primary sector in the Qatari economy impose extensive impact specifically on the governments’ revenue earnings, governmental export process, economic liquidity rate and Gross Domestic Product (GDP) of the nation. It would be vital to mention in this similar concern that the above-portrayed null hypothesis has been designed in such a way so that there occurs a high possibility of getting it rejected at the time when the findings of the research are revealed. LITERATURE REVIEW This literature review section has been formulated completely depending upon the secondary data sources. This method implemented for literature review in this study includes the effective evaluation of the various online journals, reports and government websites. The online journals, which have been discussed below, form the primary source of secondary data contributing to this literature review. However, there exist certain positive and negative factors associated with these sorts of data sources. One of its most apparent positive factors implies that these secondary data sources contain prolonged information about Qatar’s economy. On the contrary, using literature review to gather secondary information might project a biased opinion of the authors regarding this topic. Hence, to eradicate this particular limitation, secondary sources illustrating both favourable and contradictory facts to the stated research issue have been considered for this study. In this particular section, multiple secondary data sources have been accessed and reviewed with the aim of analysing the effects of oil and gas sector on the economic growth along with development of Qatar. As discussed in the report projected by Ibrahim & Harrigan, one of the reasons behind Qatar’s continual development is the existence of large hydrocarbon reserves existing within the nation. The report also describe that the increasing level of energy demand in the international market is the other reason contributing to the development of this nation at large (2-3). Moreover, the review made by Ibrahim & Harrigan also projected about a slight setback addressed by this nation i.e. Qatar in term of its incapability towards effective utilization of natural gas reserves due to certain factors. These factors comprised detachment from major market areas, improper assessment along with execution of technological advancements in terms of gas extraction and financial related challenges (2-3). All these factors together contributed towards hindering the economic development of the nation by a certain extent. In order to address and mitigate this situation, the nation intended towards breaking down the barriers that were meant to constrain the exports of ‘liquefied natural gas’ to other nations. Eventually, when the export barriers came down, the nation entered into partnerships with international oil and gas companies and started its first reliable gas supply business with Japan. The reviews of Ibrahim & Harrigan also stated that after forming successful partnership with Japan, the nation looked forward to the global market as a reliable and flexible liquefied natural gas supplier (2-3). The above discussed aspects eventually helped Qatar in bringing huge amount of foreign cash inflow and exploiting various business opportunities, resulting in boosting up its economic health levels. The review of Ibrahim & Harrigan also portrayed that with the development in the areas of international oil and gas exports, the nation has achieved appreciable macroeconomic development levels. Since the starting phase of the year 2000, the nation has undergone faster growth rate than any other nation in terms of economic growth, per capita income and purchasing power parity. Increase in the revenue levels due to the growth of the nation’s oil and natural gas segment has significantly helped the nation in raising higher living standards of the people (3-4). In contrast with the above depicted reviews, the other review made by the Ministry of Development Planning and Statistics is completely opposite. As per the report published by the Ministry of Development Planning and Statistics, Qatar government is currently focusing more towards restricting its trading in terms of oil and gases. Moreover, it is using the non-oil and gas economy concept as a driving factor towards growth. The reviews made by the Ministry of Development Planning and Statistics also projected that the nation’s initiative towards making massive investments on infrastructure programs with the intention of increasing the demand for oil and gas have eventually supported the nation towards enhancing its financial position (Ministry of Development Planning and Statistics, Qatar, “Qatar Economic Outlook 2013–2014”). With this initiative, the Qatar government expects a hike in the employment rates, which in turn will stimulate massive economic growth of the nation. According to the government of Qatar, the initiative depicts a complete change the nation’s economic priority from being complete dependence on export of hydrocarbon products to shifting towards ‘non-oil and gas’ trend. It can be affirmed that through this non-oil based initiative, the Qatar government expects significant improvement in terms of government revenue earnings rates, governmental export earnings, economic liquidity rate and GDP among others (Ministry of Development Planning and Statistics, Qatar, “Qatar Economic Outlook 2013–2014”). In accordance with the reviews made by the Ministry of Development Planning and Statistics, it can be apparently observed that the nation expects a population hike of above 2.2 million by the end of the year 2014, which would further bring about expansion in the nation’s financial stance but would significantly bring down its per capita income level. As per this review, the Qatar government will revise and increase the production along with the distribution of natural gas in order to maintain a balance growth level between oil powered economy and non-oil economy. The price inflation level is also expected to stay at moderate rates (Ministry of Development Planning and Statistics, Qatar, “Qatar Economic Outlook 2013–2014”). Other source is about an article, which published by the Ministry of Development Planning and Statistics of Qatar, projected the current and future economic conditions of the nation. Adding to this, the article also described about the nation’s future perspective about making a shift from its oil trade dependent economy to non-oil based economy, through which the nation believes that it can reap significant benefits in long run (Ministry of Development Planning and Statistics, Qatar, “Qatar Economic Outlook 2013–2014”). The third source is about data projections depicting Qatar’s GDP rates prevailed between the period 2008 to 2012 (Trading Economics, “Qatar GDP Growth Rate”). RESEARCH METHODOLOGY AND DESIGN The research methodology chosen for this study is qualitative approach. In this similar context, a majority of the data has been collected through accessing secondary sources. The secondary data sources used in this study mainly include online journals, case studies, government websites and online referrals. The rationale for choosing qualitative type of research methodology over quantitative research methodology is mainly due to the absence of prediction and measurements standards about this nation’s future economic perspective. It is worth mentioning that using group discussions and questionnaire surveys for collecting primary data is quite complex and most vitally time consuming. In addition, the results obtained from primary data sources are also limited when guaranteeing critical data analysis. Accordingly, as this study has been emphasising a broader subject area related to the historical performances of the economy, updated information from primary sources would have been quite challenging to obtain and thus, secondary data sources have been determined as effective in projecting prolonged information about the impact of oil and gas sector in the overall economic development of Qatar. With the use of secondary data sources, projecting a clear understanding about the contributions made by the oil and gas sector of the economy in assisting the nation to recover from its under-developed economic scenario. Apart from the above-discussed facts, the data collection technique for this research study is based on effectively analysing the secondary sources in the form of literature reviews that have been discussed in the above section. Moreover, it can be affirmed that the design of this particular research study is fundamentally based on the above-described sources. One of the sources i.e. an article written by Ibrahim and Harrigan, clearly describes the various upliftment stages followed by the Qatari government to develop the economic conditions of Qatar. This article also depicted a clear understanding about how this nation started its first trading relationship with Japan, Korea and other nations through lowering down of its trade barriers and thus brought in huge cash inflows (1-2). DISCUSSION: RESULTS AND ANALYSIS OF RESULTS It can be apparently observed that due to increased level of economic development in other nations, the demand for oil and natural gas also augmented, which presents profitable opportunities in front of the Qatari government towards attaining substantial revenues through oil and gas trade (Michigan State University, “Qatar: Economy”). Arguably, the impact of oil and gas segment was quite limited on GDP growth of Qatar during the early decade of the 21st century. This might be owing to the reason of slowing down of the nation’s exports in natural gas item, which once boosted during the period 2006-2011. In the year 2012, the oil and gas sector was accounted a maximum percentage i.e. 58% of the nation’s economy. Despite this, the oil and gas sector would impose limited impact on Qatar’s GDP growth in future. In this similar context, Qatar government identified the factor of slowing progress of exports regarding natural gas item to be the prime reason of the above-discussed result. It can be apparently observed that the oil and gas sector is incessantly dominating the economy of Qatar from the previous few decades. However, this has become quite limited in this present day context due to various reasons. These reasons encompass increased level of globalisation, gaining momentum of internationalisation and prevalence of extreme business market competition among others. In response, the Qatar government is identified to be making deliberate efforts in developing the economy of the nation through expanding its oil and gas production as well as distribution procedure (The Daily Star, “Business”). Apparently, this particular aspect justifies the effects imposed by the oil and gas segment on the Qatari economy in the recent years. In the recent phenomenon, oil and gas sector has been the backbone of Qatari economy and has tremendously helped this nation in coming out from the ranking of being one of the world’s poorest countries. Further analysis of this article also revealed about the future expectations of the Qatari government towards effective utilisation of the revenues earned through oil trades for developing other under-developed economic areas such as education, job and sustainable resource utilisation sector among others (Michigan State University, “Qatar: Economy”). To a major extent, the result obtained herein describes the changes brought about by the oil and gas sector, in the economic status of this nation within the past decades. The results obtained in this study further revealed that the Qatari government is focusing towards attaining a balance between the oil based economy and the non-oil based economy. The analyzed data also reveal that apart from promoting oil and gas exports, the government is making deliberate efforts towards making the non-oil sector to grow and thus maintain a steady GDP growth rate. The process of incurring a decrease in the GDP rate from being 14.40% in 2008 to 4.30% in the third quarter of 2013 clearly projects that the nation is focusing towards following a steady developmental path with the intention of attaining significant benefits in the long run (Ministry of Development Planning and Statistics, Qatar, “Qatar Economic Outlook 2013–2014”). Apparently, a proper association between the developmental phases and the impact of oil and gas sector towards developing the economic position of Qatar cannot be completely drawn in this article. Specially mentioning, the results obtained through the literature review projected much about the marketing trends adopted by this nation relating the trade of oil and gas that led towards developing its economic conditions at large (Ibrahim and Harrigan, 1-2; Trading Economic, “GDP Growth Rate | Notes.”). This further justifies the second question of this research evidently portraying the rising dominance of the oil and gas sector on the economy. RECOMMENDATIONS Based on the obtained results for the determined research questions, it can be advised that the nation along with its government can shift its focus from just remaining concentrated on revenue earning through oil exports to effective utilisation and development of sustainable energy sources as well as other related aspects. These aspects include infrastructure development, educational advancement and creation of more employment opportunities that will significantly benefit the nation in the long run. The efforts of the Qatari government towards attaining a specific level of balance between the oil and the non-oil based economy can be duly considered as the preliminary step of securing future sustainability of the nation in terms of finance. CONCLUSIONS As per the above analysis and discussion based on secondary sources, the following conclusions can be drawn about the impact of oil and gas sector on developing the financial conditions of Qatar. One conclusion obtained from this study reveals that Qatar has been making deliberate efforts such as making substantial investments with the aim of developing its oil and gas sector, which supported the nation to attain financial benefits. Another conclusion to this study elaborated that the Qatari government tended to limit the percentage of oil export and develop non-oil based economy through effective utilisation of previously accumulated revenues in an effort to reduce the dominance of this particular sector on the economy. On the basis of this understanding, the null hypothesis can be neglected as it can be seen that the oil and gas sector has laid positive impact towards uplifting this nation and developing its economy at large. Works Cited “Business.” The Daily Star. 2013. Web. 21 Mar. 2014. Ibrahim Ibrahim and Harrigan Frank. “Qatar’s Economy: Past, Present and Future.” Introduction (2012): 1-23. Print. “Qatar Economic Outlook 2013–2014.” Ministry of Development Planning and Statistics, Qatar. 2013. Web. 21 Mar. 2014. “Qatar: Economy.” Michigan State University. 2014. Web. 21 Mar. 2014. “Qatar GDP Growth Rate”. Trading Economics. 2013. Web. 21 Mar. 2014. “The World Factbook.” Central Intelligence Agency. 2014. Web. 21 Mar. 2014. Read More