Impact of Oil Price to the Country and Citizens
Abstract
The above study seeks to explain the impact of the decline in oil prices in Sultanate of Oman with a focus on the country and the people as well. The research will concentrate on achieving the set objectives, which will require analysis of how the same influence the economy, the citizens and other Non-Oman individuals. The study outlines that Oman is a country that is heavily reliant on oil production and calls for a need to diversify income revenues. However, before stabilizing the country’s economy, there is the need to manage the worrying prices through enacting of different policy issues. One of the threats that are posed by the declining oil prices is the fact that the country risks experiencing increased unemployment rate and slashing of the public expenditure, a factor that will hurt the country’s economy. The study further indicates the need to use descriptive research design to fully understand the impacts of the decline in oil prices in the country. The study targets different stakeholders, which include various agents at the exploration fields, workers and government agents. Both primary and secondary sources are used for the purpose of data collection, as the research will involve the collection of both quantitative and qualitative data. Descriptive analysis is employed in the study to help with data analysis as different people have cited the significance of the approach.
1.0 Introduction
1.1 Background to Study
Oman is one of the countries that are heavily reliant on oil as a product, and a drop in oil price is a matter of great concern, not only for the country, but the citizens as well. Since pre-colonial era, the country has heavily relied on the product and statistics indicate that in 2015 alone, 75% of the government revenue was generated from the sale of oil (Nereim, 2014 Para 1). In the recent past, oil prices have reduced slightly from US$85 per barrel to $80, which is a significant change (Nereim, 2014 Para 11). The issue attracts concerns from different stakeholders, as the country depends heavily on oil as a product. Other sources of income other than oil have not experienced significant growth, which is also an issue.
1.2 Justification
One of the major reasons why the above study is worth conducting is that Oman has no other significant sources of income other than oil. Moreover, at the current exploitation rate, the oil reserve in the country is subject to depletion in the next fifteen years. Besides, most of the services offered by the government such as education plans, health services, and other development projects in the country are heavily reliant on the sale of the product (Ahmad & Masan, 2015 p 95). The declining oil prices in the is a threat to the state as it is likely to contribute to increased unemployment rates in the nation and further slash of the public spending, a feature that will compromise the country’s economy. To manage inflation in the country, the state has been forced to expand its government expenditure, an aspect that should be addressed. Besides, the country has people from different parts of the world, a matter that makes a change in oil price in the country a matter of concern for various stakeholders (Omgba, 2015 p 185). Further, if the issue with oil price is not addressed, the country will be at risk of experiencing economic depression. It is worth noting that Sultanate of Oman has dealt with the above issue for a while now at the international market, as the issue of oil prices is a critical concern to many.
Moreover, the government of Oman has taken the front line in dealing with the issue by developing effective policies to address the situation. According to different scholars, the 2016 budget was increased as a useful measure to stimulate the country’s economic growth and enhance investment in the private sector (El Anshasy & Bradley, 2012 p 619). Moreover, other measures include an effort to slash subsidies to eliminate the negative externalities because of the low price of the product in the region. Managing the price of the product in the country will enable the government of Oman to diversify revenue from different stakeholders, a feature that will not only benefit the economic growth of the country by enhancing the living standards of the citizens as well as global community as a whole. Besides, it is imperative to note that if the situation is not addressed by the concerned parties, the country’s GDP will reduce significantly, a matter that will set back the state’s economy (Stefanski, 2014 p 485). To avoid any aspects that will compromise the lives of the citizens and dependent states, the government has to take quick actions to manage the situation before it is out of hand.
1.3 Study Objectives
Decline in oil prices is a matter of great concern (Cunado, Jo & Perez de Gracia, 2015 p 870), a feature that makes the above paper focus on identifying the impact of oil prices to the nation as well as its citizens. To adequately address the situation, the study will rely on understanding both the positive and negative externalities of the impact of the decline in oil prices at both local and international markets.
1.4 Specific Objectives
1.5 Research Questions
How is Oman’s economy influenced by a fall in oil prices? Which are the positive and negative externalities of decline in the price of the product in the country?
Are the Non-Oman’s influenced by a decline in oil prices?
2.0 Methodology
2.1 Introduction to study area
Petroleum Development Oman (PDO) is the primary organization that is involved in the exploration and production of oil in the country accounting for about 70% of all the oil products sold in the region (Country Reports, 2016 p 10). It is government owned company although other firms are operated by the institution on behalf of the government. The figure below indicates the state of Oman and two significant areas where oil production is experienced. Occidental is one of the firms that is leading in the production of oil in the state with Mukhaizan being the leading field and is located in South-Central Oman (Oman - Occidental Petroleum, 2016 Para 1). Therefore, the study will focus on the major fields that are involved in the exploration and production of oil in the country.
Figure 1: (Oman - Occidental Petroleum, 2016) Showing a Map of Oman
2.2 Research Design
According to Jagtap et al., (2015), research design refers to a blueprint that is used in the collection and analysis of the data among other significant aspects that are incorporated into a research project. For the purpose of the above study, descriptive research design will be used due to time constraint, which is a major limitation. Therefore, the design will aim at evaluating the impact of the decline in oil prices to Oman as a country as well as its implications to the citizen’s well-being. A descriptive study will, therefore, assist in establishing effective measures that will be taken to help address the issue in the country. The above research design is worth using as it offers the researcher with adequate information on a large population within a short time. Therefore, for a better understanding of the study topic and insightful interpretation of the research topic, both qualitative, and quantitative data will be used.
2.3 Target Population
It is imperative to understand that a target population for any single study ought to fit in a particular specification that aligns with the research topic. Some of the target groups that will be helpful for this study include the different oil exploration firms in Oman, workers at the respective companies, individuals from the government concerned with the management of oil prices in the region and people. As evidenced, the target population incorporates people that deal with oil or are influenced by a change in the price of the commodity in the country.
2.4 Sampling Frame
The purpose of identifying a sampling frame is to recognize some of the essential elements from a large population that can be used to help in drawing a conclusion on the entire population. For the purpose of the above study, only 40 respondents will be utilized and will be selected randomly from the aforementioned areas.
2.5 Data Collection Techniques
2.6 Data Analysis and Presentation
2.7 Time Scale for the Research
The research will take two months from writing the research proposal to data collection and analysis. The above work plan indicates the different activities that will be carried out during the two-month period and duration of time taken.
Bibliography
Ahmad, A.H. and Masan, S., 2015. Dynamic relationships between oil revenue, government spending and economic growth in Oman. International Journal of Business and Economic Development (IJBED), 3(2), pp. 93-115.
Country Reports - Oman' 2016, Oman Country Monitor, pp. 1-16. [Online] Available at: https://www.bti-project.org/fileadmin/files/BTI/Downloads/Reports/2016/pdf/BTI_2016_Oman.pdf [Accessed: 2 August 2016].
Cunado, J., Jo, S. and de Gracia, F.P., 2015. Macroeconomic impacts of oil price shocks in Asian economies. Energy Policy, 86, pp.867-879.
El Anshasy, A, & Bradley, M., 2012. Oil prices and the fiscal policy response in oil-exporting countries. Journal of Policy Modeling, 34(5), pp.605-620.
Jagtap, S, Jagtap, S, Chakrabarti, A, Lunds universitet, L, & Lund University, F 2015, 'Aesthetic design process: Descriptive design research and ways forward', SwePub.
Nereim V., 2014. Drop in Oil Price Gives Omanis Cause for Concern [Online]. Available at: http://www.thenational.ae/world/middle-east/drop-in-oil-price-gives-omanis-cause-for-concern [Accessed on: 2 August 2016].
Omgba, L.D., 2015. Why do some oil-producing countries succeed in democracy while others fail?. World Development, 76, pp.180-189.
Oman - Occidental Petroleum, 2016 [Online] Available at: <http://www.oxy.com/OurBusinesses/OilandGas/MiddleEast/Pages/Oman.aspx> [Accessed: 2 August 2016]
Stefanski, R., 2014. Structural transformation and the oil price. Review of Economic Dynamics, 17(3), pp.484-504.
