Report about Understanding to Oil Market

            The economic condition of a country represents its strength towards development. Countries having a stable and strong economic condition are progressing rapidly in the world. The economic condition of a country can be measured through the use of economic indicators. In the present work, some economic indicators are used to measure the economic condition of two GCC countries Kuwait and Saudi Arabia from 2006 to 2016. Present work also emphasis on oil market of both countries.

Kuwait Overview of Understanding to Oil Market

        Kuwait is the region of GCC located in Southwest Asia. While in Arab it is located in the Northeastern portion of the Arab Peninsula. The total population of Kuwait is around 2595628. Somehow, the overall geographical area covered by Kuwait is around 6,879 square miles. In the financial industry, Kuwait has a leading and strong position because of its geographic position in the world. Kuwait is situated among the countries that have a strong economic condition in the world. The neighboring countries of Kuwait are Iraq, Saudi Arabia, and the Persian Gulf. Like other Arab countries, Kuwait is also involved in oil production and selling the business. In fact, the main source of income is also considered as oil and petroleum trade.

        In accordance to the CIA report, almost 92% of the expert revenue in Kuwait is supported by petroleum trade with European countries and other Eastern countries. Furthermore, income generated by the petroleum trade of the country is more than 90% of the government income (Export.gov, 2018). The official currency of Kuwait is known as Kuwait dinar (symbol: KWD). Kuwait dinar is considered as the world strongest currency. Continuously growing rate with stable condition indicates the strength of the Kuwait currency. High expert and exchange rate is the major cause of currency strength. In 2006, the currency was at its all-time high value. The highest value was 0.31. While on the current value of the currency in the Kuwait market is stable at 0.30.  Currency strength is also presented below in bar chat.

        The wages level is high in Kuwait. The average gross salary gives in Kuwait is almost KWD 21,141 that is even more than some developed countries in Europe. Somehow, the average net salary recorded in the Kuwait organizations is above KWD 18,109. While on the other hand, the cost of living in Kuwait (for a single person) is only KWD 512.11.

Economic Indicators of Understanding to Oil Market

        The section economic indicator is consist of information about the main economic indicators of Kuwait for a 10-year duration (from 2006 to 2016). The economic indicators include Real GDP, GDP per capita, Inflation (GDP deflator annual %), Unemployment rate, and Oil rent (as % of GDP).

Real GDP of Understanding to Oil Market

        Real GDP is the economic indicator that represents the real GDP of an economy after the adjustment of inflation. The presented below chart shows that real GDP is declining in Kuwait. It was recorded as 100 billion in 2006. But from 2010 to 2012 it was increased up to the all-time high value of 170 billion (data.worldbank.org, 2019).

 GDP per capita of Understanding to Oil Market

        GDP per capita represents the economic output of the country with respect to the population. GDP per capita is decreasing in Kuwait which may cause economic issues in the future. In 2006 it was around 43 thousand per capita while records of 2016 indicate 27 thousand per capita.

Inflation (GDP deflator annual %)

        Inflation represents the changes occurred in the price index of Kuwait (Dransfield, 2013). The high rate of change indicates the changes in the money supply. Inflation recorded in 2006 was around 14%. While in 2016 inflation is recorded as below -5%.

        Unemployment rate presented below in the graph shows the percentage of the jobless population. In accordance with this data, the unemployment rate was increased in part but now it's going towards decrease continuously.

The Rationale behind Changes of Understanding to Oil Market

        The above-mentioned graphs and data of economic indicators are projecting continuous change in the values and percentages from 2006 to 2016. The changes are caused by some rationales that are discussed here in this section. At first, the rationale behind changes in Real GDP is that economic output and the inflation rate of Kuwait is changing over the selected period of time that directly draw impact on overall real GDP of the country. Increase in real GDP is caused by an increase in output. Somehow, decreasing real GDP after growth in 2012 and 2013 shows that inflation and decrease in economic output are the main causes of change in real GDP of Kuwait. The analysis presents that GDP per capita is also decreasing over the selected duration which is caused by an increase in population. The rationale behind the fluctuating inflation rate changes occurred in interest rate, money supply, and uncertainties. While on the other hand, the unemployment rate is also changing with the passage of time. Increase in the unemployment rate is because of limited job opportunities, limited private project, an increasing number of expat and an increasing population of Kuwait. The unemployment rate is now decreasing in Kuwait which is caused by the support of government and other private industries to create maximum job opportunities. The rationale behind changing oil rent is changing political interests and demand changes in the international oil market.

Comparison with Saudi Arabia of Understanding to Oil Market

        Saudi Arabia is also a GCC country located in Western Asia of the Arabian Peninsula. Saudi Arabia is also a neighboring country of Kuwait. Comparative analysis of Saudi Arabia and Kuwait will represent the economic condition and strength of both countries in GCC countries. The comparative analysis is based on economic indicators such as real GDP, GDP per capita, unemployment, oil rent, and inflation in the country.

Real GDP of Understanding to Oil Market

        Comparative analysis of Real GDP from 2006 to 2016 in Kuwait as well as Saudi Arabia represents that real GDP was showing almost the same trend. The similarity is because of the same circumstance both had in the Middle East. In addition, real GDP of Saudi Arabia remained higher as compared to the real GDP of Kuwait from 2006 to 2016.

Oil Market Dependency of Understanding to Oil Market

            Saudi Arabia and Kuwait both are mainly generating revenue from the export of oil and petroleum products. In the oil market, Saudi Arabia is considered as 2^nd largest oil reverser country in the world. Saudi Arabia and Kuwait export billions of gallon oils and petroleum annually to the other countries of the world in Europe, US and Middle Eastern countries. The presented below table presents the oil renting in Saudi Arabia and Kuwait during 2006 and 2016.

Comparative analysis of both countries indicates that Kuwait is relatively more dependent on oil as compared to Saudi Arabia. Kuwait earns more than $52.87 billion annually by selling crude oil and petroleum.

Conclusion on Understanding to Oil Market

                The aim of the present report was to conduct a comparative analysis of Kuwait and Saudi Arabia. Both neighboring companies are involved in the production and selling the business of crude and refined oil. The major constituent of their economic growth is petroleum trade with other countries around the globe. The analysis represented that wages level was higher while living cost is lower in Kuwait as compared to the Saudi Arabia. The economic indicators used in the analysis include real GDP, inflation rate, oil rent, unemployment rate and GDP per capita. After inflation adjustment, the real GDP and GDP per capita rate decreased for Kuwait. The higher money supply leads to a decrease in inflation, unemployment rate, and oil rent. Different economic indicators are projecting continuous change and increase in the outcomes. The statistical values are mentioned in the report to illustrate percentage increase or decrease in the indicators for Kuwait and Saudi Arabia. In case of Saudi Arabia, GDP per capita is considered for decreasing and increasing trend of both countries. The inflation rate is different for both countries but depicts similar decreasing trend. The implementation of efficient policies by government is reducing inflation rate for both countries. The ten year statistical analysis of oil market dependency is considered from 2006 to 2016 for Kuwait and Saudi Arabia. The results of comparative analysis show fluctuation in statistics for both countries. The increasing and decreasing trend have significant association with policies, marketing, selling and production of petroleum and geographical location.

References of Understanding to Oil Market

data.worldbank.org. (2019). GDP (current US$). Retrieved from data.worldbank.org: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2016&locations=KW&start=2006

data.worldbank.org. (2019). Oil rents (% of GDP). Retrieved from data.worldbank.org: https://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS

Dransfield, R. (2013). Business Economics. Routledge. Retrieved 2019

Dwivedi, D. N. (2002). Microeconomics: Theory And Applications. Pearson Education India.

Export.gov. (2018, 10 30). Kuwait - Oil and Gas. Retrieved from www.export.gov: https://www.export.gov/article?id=Kuwait-Oil-and-Gas