Benefits and Drawbacks of Countries Dependent on Oil and Gas

Pages: 3 (839 words) Published: December 2, 2013
Essay Question 1 – Global Resources

The distribution of natural resources like oil and gas are unevenly distributed across the world (Stutz, 2007). This essay will explain where the majority of oil and gas is located. Thereafter, the focus will be on the benefits and drawbacks of countries that are dependent on oil/gas. Finally, a conclusion will be given which sums up the most important factors.

Allocation Oil/Gas
The majority of the oil reserves are located in the Middle East. An estimate of 65% of the total worldwide reserves is situated in this region with Saudi Arabia being the country with the most oil reserves. Other large oil reserves are located in Mexico, Venezuela, Russia and Nigeria (Stutz, 2007).

When we look at the allocation of gas across the globe we can conclude that the distribution differs from that of oil. Almost 40% of all gas reserves are located in Russia and Central Asia; another 34% is located in the Middle East (Stutz, 2007).

Strengths resulting from being oil/gas dependent
The main advantage of being dependent on oil/gas is unarguably having an absolute advantage over countries that do not possess these resources. As a result of this extractive industries, which is another name to classify countries that have abundant oil/gas, can experience economic growth by exporting oil/gas to countries that do not have these resources (Dicken, 2011).

Other advantages resulting from oil/gas allocation is the bargaining power of such extractive industries. Nowadays most of the extractive industries are part of the Organization of the Petroleum Exporting Countries (OPEC). The OPEC countries have the power to sanction (embargo) a non-producing oil company when they do not agree with its actions. This can on turn have negative economic implications on the sanctioned economy. An example of this is the sanctioning of the United States by OPEC countries during the war with Israel (Stutz, 2007). Several advantages that include bargaining...

References: Dicken, Peter (2011). Global shift: mapping the changing contours of the world economy. 6th ed. Thousand Oaks, Calif.: Sage.
Stutz, Frederick P. & Warf, Barney (2007). The world economy: resources, location, trade, and development. 5th ed. Upper Saddle River, N.J.: Pearson Prentice Hall.
Worldbook. The 1970’s oil shock.
Asghari, Mahdi. 2013. Technology transfer in oil industry, significance and challenges.
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