Chathamhouseorgpublicationspapersview180825 e liu

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Unformatted text preview: cts the Arab world today (World Bank, 2004; Nabli, 2004) The disappointing growth and employment performance of the Arab world is mirrored in the low degree of diversification and sophistication of exports as well as the limited role of manufacturing in most Arab economies. Recent development experiences and the received literature suggest that countries that achieved high and sustained growth, by and large, have diversified economies and are endowed with good economic governance; and most, though not all, had large and dynamic manufacturing sectors (e.g. Imbs and Wacziarg, 2003; Hausmann, Hwang and Rodrik, 2006; UNIDO, 2009). In this report, we agree with the view that oil is not destiny and that its ultimate impact on development hinges on the underlining institutional and policy environment. However, this report will also show that while oil resources have provided a huge opportunity to the Arab world to finance accelerated development; it has, nevertheless, complicated the development process in the region. This assessment is consistent with the consensus view in the received literature, which suggests that oil rents impede economic diversification and penalize manufacturing growth by generating Dutch Disease and extreme volatility. Oil rents also promote bad governance and complicate transition to transparent and accountable democratic rule. In addition, the oil sector tends to be located at the periphery of the product space, which makes it difficult for the economy to move into new and more sophisticated lines of products and services (Hausmann and Klinger, 2007). 223 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 Saudi Domestic Consumption Turn Firstline 224 Oil DDW 2012 1 Saudi domestic oil consumption causes crisis in the long term – Energy efficiency is key Lahn, Research Fellow for Energy and Development at Chatham House and Stevens, Senior Research Fellow for Energy at Chatham House and Emeritus Professor at Dundee University, 11 Glada Lahn, Research Fellow for Energy and Development at Chatham House and Paul Stevens, Senior Research Fellow for Energy at Chatham House and Emeritus Professor at Dundee University, 12-11, [“Burning Oil to Keep Cool The Hidden Energy Crisis in Saudi Arabia,” The Royal Institute of International Affairs, Chatham House, www.chathamhouse.org/publications/papers/view/180825] E. Liu Saudi Arabia’s place in the world oil market is threatened by unrestrained domestic fuel consumption. In an economy dominated by fossil fuels and dependent on the export of oil, current patterns of energy demand are not only wasting valuable resources and causing excessive pollution, but also rendering the country vulnerable to economic and social crises. This report explains why the need for change is urgent, and what options and challenges the Saudi government faces in trying to address the politically sensitive issue of domestic energy prices. The report begins by examining the causes for concern. Chatham House simulations reveal that, on the current trajectory, Saudi Arabia’s domestic energy consumption could limit its exports of oil within a decade. This would have a severe effect on government spending, over 80% of which is dependent on oil revenues.1 Ultimately, it may reduce Saudi Arabia’s spare production capacity, causing greater volatility in the world oil markets. Next, the report considers the role of historically low energy prices in the kingdom in both driving these unsustainable consumptio...
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This note was uploaded on 01/30/2013 for the course ECON 101 taught by Professor Burke during the Spring '13 term at Southern Arkansas University.

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