Many US newspapers (here, The Chicago Tribune) are running this Associated Press story about oil wealth and the Gulf States. The pieces notes that with record incomes, the various countries are trying to avoid the mistakes they made during the last oil boom by building solid infrastructure and by diversifying their economies. Saudi Arabia, as the greatest oil producer as well as the most populous of the Gulf States, is the focus. Worth reading.
Gulf states rise higher on oil boom
SEBASTIAN ABBOTSHARM EL SHEIK, Egypt – Gulf countries swimming in oil wealth are using the money to build huge industrial cities and gleaming financial centers to sustain them when the wells run dry.
They learned valuable lessons from wrongheaded investments in the 1970s oil boom, but economists worry the countries still aren’t making the education and labor reforms crucial to long-term stability
President Bush urged Gulf countries Sunday at the opening of the World Economic Forum on the Middle East “to build more diverse and more dynamic economies” to prepare for a day without oil.
With record oil prices near $130 per barrel, Gulf nations certainly have ample revenue now.
Cooperation Council, which includes energy powerhouse Saudi Arabia, earned $381 billion from oil exports in 2007 and an additional $26 billion from gas, according to the Washington-based Institute of International Finance. Oil prices hit $99.29 a barrel in on Nov. 21, 2007.
Saudi Arabia, the most populous Gulf country, has been one of the most aggressive in pushing industry development that can help diversify the kingdom’s revenue away from natural resources and provide jobs for a large youth population that the government worries could be pushed toward radicalization.
Saudi King Abdullah has championed a plan to build six new cities around the country that the government hopes will add $150 billion to its economy by 2020 and create over a million new jobs.
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May:22:2008 - 09:45
I recall that in the 1970s the KSA ran out of capacity to handle the massive amounts of imports into the country, so building new ports now makes a certain amount of sense.
However, unlike investing in new oil fields – because oil can be sold ahead on the futures markets for an assured return – one can get burned if one builds new port facilities only to have demand drop unexpectedly. The decision to build a new port, then, means that the Saudis really expect the oil money to keep flooding into their country for at least a decade.
May:22:2008 - 13:35
It’s not only imports. The Saudis expect to be doing a lot of non-oil exporting as well. They are effectively diversifying their economy, though of course there’s more to do.