Crude oil is one of the natural resources found in the earth’s crust. Crude oil is a blessing to countries that have large quantities and qualities of it as well as countries that possess the technological know-how in harnessing it in terms of its exploration or discovery, drilling, production, processing, transportation and marketing . Crude oil is one of the typical examples of natural resources that deplete with time without not being replenished because it is one of the nonrenewable resources. Crude oil is often called petroleum from which petroleum products are obtained. Knowing the meaning of crude oil, importance of crude oil and some products that can be obtained from crude oil is not enough but it is crucial for every oil-driven economy to make plans regarding diversifying the the economy for reasons this subject matter aims to present. Crude oil is associated with natural gas hence it is often referred to as oil and natural gas. The petroleum industry directly and indirectly serve the petrochemical industry which make use of petroleum in manufacturing and processing of petrochemicals, petrochemical products and petrochemical products derivatives. The petrochemicals are important in that some petrochemical products are used in agricultural industry and even pharmaceutical industry. Also oil and gas industry is a source of job creation. Petroleum industries and petrochemical industries are well known for job creation apart from the fact that crude oil when traded locally and internationally contribute significantly to sources of revenue to countries that have crude oil deposits and crude oil reserves thus fostering infrastructural development as well as foreign exchange earned from crude oil export. Besides, oil and gas have numerous business and investment opportunities.
Despite the importance of oil and gas, it will be rational and beneficial on the long run for crude oil producing countries that depend on crude oil as revenue or use revenue generated from petroleum for supplementing their economy to diversify such economy by thinking beyond oil. Among others, some of the reasons why oil producing and oil dependent countries should consider diversifying their economy are as follows.
1. Crude oil is one of the known nonrenewable resources. It cannot be replenished if exhausted. So any economy that solely depends on crude oil as a major source of revenue may experience economic set-back if the oil reserve is depleted.
2. The changes in oil prices is one reason oil-rich countries should diversify. The fluctuation in the prices of crude oil may be favourable and unfavourable as the prices are affected by but not limited to the amount of crude oil production. Apart from the amount of oil and gas produce, the marketing of crude oil and petroleum products are determined by the forces of demand and supply for petroleum and crude oil products. If the prices of crude oil are high, crude oil becomes favourable to sellers of crude oil or exporters of crude oil as well as the oil producing countries. As at the time of publishing this article, fall in oil prices show the need for oil-based economy to diversify.
3. Diversifying oil dependent economy can be a good strategy in developing other sectors of the economy such that even when oil reserves get exhausted or oil prices fall drastically such economy will still thrive. As a matter of fact diversifying oil producing economy can be a veritable means of ensuring the stability of an economy.
4. Sources of alternative energy such as biofuel, solar energy, wind energy, and others are now being harnessed as they are more environmental friendly than oil and gas. Hence, since the world is going green, it is recommended that oil dependent countries should think beyond oil
To diversify oil dependent economy it is expected by the government of such a country to directly and indirectly encourage investments in other prospective sectors that have possibilities of supporting the economy through public and private partnership. Diversifying an oil dependent economy will boost the growth of other non-oil sectors thus making the economy less vulnerable to economic recession which give way to bankruptcies, unemployment and other negative economic impacts. Some sectors oil producing and oil dependent economy can diversify to are agriculture, manufacturing, transport, tourism, mining or metallurgy, services, etc.
Agriculture has so many potentials for supporting and sustaining an economy that can embrace it fully. This is because the importance of agriculture cannot be overemphasized. Agriculture is a major source of food, shelter and clothing as well as other raw materials for other industries. Besides, there are different promising agricultural businesses such as agricultural products, agricultural equipment and others that oil-rich economies can tap into with proper and sustainable business financing .
It is well-known that if a country can manufacture products that can meet the needs of its citizens such a country will not spend money importing what they can manufacture to satisfy the local consumers and even have ability to export their finished products depending on what the manufacturers produce within the country as well as the quantities and qualities of what they produce.
Oil dependent economy can as well pay attention to mining as there are marketable minerals other than oil and gas that can support and sustain an economy endowed with different minerals, gemstones, metals and even alloys that can be derived from the combination of metals and nonmetals.
Transportation ( land transport, water transport or air transport ) can be a good source of revenue for any economy that pay attention to it with good policies and regulations since transportation involves the movement of people and goods. Tourism can also be a good way of diversifying oil dependent economy if tourism infrastructure are in place.
Countries with expertise in certain types of services can as well consider diversifying their economies by promoting their services industry both locally and internationally to other countries that may need their services.
Oil Producing Countries
Although all countries are blessed with one or more natural resources but not all countries have crude oil and natural gas. You can identify the countries that have crude oil from the article Natural Resources or Mineral Resources of Countries .
From the subject matter, it is therefore recommended that oil-rich nonmembers and members of Organization of Petroleum Exporting Countries ( OPEC ) should think beyond oil as the drop in oil prices give credence to the proposition why should oil-based economies diversify.
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