Chapter III : Petroleum, gift or curse ?
1. Introduction
We have seen that silver greatly contributed to the wealth of China and Spain and that this resource also contributed to the birth
of world trade. World trade that will become globalisation with the improvements of technology and transport. Now, let’s have a
look at another important resource that earth provides and let’s observe other impacts of natural resources, and more specifically
petroleum.
DEFINITION : Petroleum, also called crude oil, is a fossil fuel. Like coal and natural gas, petroleum was formed from the remains
of ancient marine organisms, such as plants, algae, and bacteria. Over millions of years of intense heat and pressure, these
organic remains (fossils) transformed into carbon-rich substances we rely on as raw materials for fuel and a wide variety of
products. (Source : National Geographic)
For the last 70 years, petroleum became one of the key elements in our everyday life. From gasoline, kerosene and asphalt for
transport to refrigerators, medicine or plastic bottles, petroleum is the source of thousands of items we use. Detaining petroleum
can therefore be a great source of income for a country and sometimes the key element for its economic growth and hence for its
development.
On the world scale, a small group of countries detain, produce and trade most of this resource. USA, Saudi Arabia, Russia are key
countries, key actors in this sector. Let’s observe Saudi Arabia.
Geography (G5) - Chapter III : Petroleum, gift or curse? : 1
2. Location
With the help of the atlas and the guideline, complete the following elements on the map below:
-
Saudi Arabia’s neighbouring countries including neighbours sharing a maritime border;
The major seas (5) and gulfs (3);
The Suez canal;
The Euphrates and Tigris rivers;
Some major cities : Riyadh, Mecca, Tehran,Baghdad.
Title
Geography (G5) - Chapter III : Petroleum, gift or curse? : 2
3. Economy
As mentioned before, Saudi Arabia has important crude oil resources. On the world scale, it is the second in terms of reserves and
production. Let’s observe how this resource affects Saudi Arabia, in other terms, what are the impacts of crude oil on Saudi Arabia,
globally.
As crude oil is an important element of Saudi Arabia’s economy, the country made an alliance with other major oil producers to
better manage supply and prices. That’s how OPEC was born.
OPEC or the Organisation of the Petroleum Exporting Countries is a permanent, intergovernmental Organisation, created at the
Baghdad Conference in 1960. Its main goal was to prevent competition between its members to avoid lowering the prices. In
1960 they were 5 founding members that were later joined by 8 others. OPEC is now composed of 13 members.
On the map below, colour the member countries of the organisation in black to better identify the world distribution of
oil producers. Then, because of this distribution, deduct the major trade routes to supply the world. Identify the major
trade routes with arrows.
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Geography (G5) - Chapter III : Petroleum, gift or curse? : 3
Economy
1990
2000
2010
GDP (current US$) (billions)
117.63
189.51
528.21 786.52
15.2
5.6
5.0
2.4
7.1
10.9
17.2
11.5
6
5
3
2
Secondary sector (% of GDP)
49
54
58
50
Exports (% of GDP)
40
43
50
40
Imports (% of GDP)
31
25
33
27
GDP growth (annual %)
Inflation, GDP deflator (annual %)
Primary sector (% of GDP)
2018
Oil rent (% of GDP)
As we can observe, the economy of Saudi Arabia is strongly driven by its important crude oil reserves. Its revenues contribute to
almost 30% of its GDP.
But there is a hitch.
Crude oil has a very specific place in the world
economy. Oil and gas industries are the
backbone for any other industry or business
which needs to work. Then, while demand is
global, a few countries (OPEC) and through
them, a few influential companies, control 40%
of the world's supply ; making the market of
this resource unbalanced.
This combinaison makes prices extremely
volatile. World events can disrupt the flow of oil
to the market or cause uncertainty about supply
or demand which eventually leads to volatility
in prices.
Identify the major geopolitical and economic events that caused fluctuations in oil prices in the last decades :
2.
9.
3.
11.
4.
12.
6.
14.
=> As we can observe, international relations (embargo), wars, OPEC production cutting, financial crisis or pandemic may affect
oil prices drastically.
Geography (G5) - Chapter III : Petroleum, gift or curse? : 4
Consequence on Saudi Arabia’s economy : revenues of Saudi Arabia may fluctuate greatly.
Another specificity of Saudi Arabia’s economy closely linked to its oil resources, is the lack of diversity. Indeed, while oil provides a
large amount of its GDP, it also means that Saudi Arabia didn’t develop some other sectors.
Observing the GDP distribution by sector contribution, we
can highlight a major fact :
Oil and Mecca pilgrimages account for more than 50% of the
GDP!
=> Saudi Arabia is mainly dependent on oil and tourism.
Conclusion :
The economy of the Kingdom is clearly driven by the oil sector. The oil prices fluctuating heavily, it creates instability in income.
Saudi Arabia’s economy is also lacking diversity making the Kingdom next challenge.
Geography (G5) - Chapter III : Petroleum, gift or curse? : 5
Ag
25-29
6.7
7.2
30-34 80+
0.4 6.9
0.69.4
0.8
2.8
25-29
20-24 60+
4.7
5.2
11.0
22.9
15-19
Total 10-14 65+
3.0
3.1
6.6
16.7
5-9 80+
0.3
0.5
0.7
2.9
0-4
Source:4.
UnitedPopulation
Nations, Department of Economic and Social Affairs, Population Division, World Population
Prospects: The 2017
10 Revision (2017). 5
0
5
10
Percentages
The total population of the Saudi
Arabia is about 34 million people. In 2019, 83.8 % of the population is urban. The population
density is 16 people per Km2, calculated on a total land area of 2,149,690 Km2.
Age groups
Population pyramid (2015)
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
By observing the age pyramid, what comes up as odd?
Males
Females
The age pyramid shows a distortion between male and female aged
25- 65 which is the age ranges of the working force.
10
5
0
Percentages
5
10
Agegroups
groups
Age
Population pyramid
pyramid (2030)
(2050)
Population
80+
80+
75-79
75-79
70-74
70-74
65-69
65-69
60-64
60-64
55-59
55-59
50-54
50-54
45-49
45-49
40-44
40-44
35-39
35-39
30-34
30-34
25-29
25-29
20-24
20-24
15-19
15-19
10-14
10-14
5-9
5-9
0-4
0-4
Let’s understand this distortion by observing other population information and deduct the specificity of Saudi Arabia’s
Males
working force.
Males
Females
Females
International migrant stock (% of the population)
10
10
5
5
0
0
Percentages
Percentages
5
5
10
10
International Migrant Stock 2019: Country Profile
Population Division
www.unpopulation.o
Prospects: The 2017 Revision (2017).
Source: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects: The 2017 Revision (2017).
Saudi Arabia
1990
1995
2000
2005
2010
2015
2019
Dependency ratios (percentage)
4 998.4
5 122.7
5 263.4
6 501.8
8 430.0
10 771.4
13 122.3
International migrants (thousands)
30.8
27.5
25.5
27.3
30.7
34.0
38.3
a share
(percentage)
Year International
Childmigrants asOld
age of total population
Total
33.3
13.2
5.5
240.9
0.7
0.2
0.2
Refugees (thousands)
1980 Refugees as
81.5a share of international
5.6
87.2(percentage)
0.7
0.3
0.1
3.7
0.0
0.0
0.0
migrants
33.5
33.3
33.2
31.3
29.6
30.7
31.4
Females among international migrants (percentage)
1985 Median age
76.4
4.7
81.1
30.1
30.8
31.8
31.4
32.6
32.9
36.7
of international migrants (years)
International
migrants
by
age
group
(percentage)
1990
76.1
5.1
81.2
25.4
24.6
24.2
24.1
23.9
22.4
19.1
0-19
74.0
74.6
74.9
75.0
75.1
76.6
79.3
1995 20-64 75.4
5.3
80.6
0.6
0.8
0.9
0.9
1.0
1.0
1.6
65+
2000 Migrants originating
65.0
5.1same SDG region
70.1 (percentage)
27.3
27.1
26.6
26.5
26.5
26.4
26.4
from the
Source: UN DESA (2019a, 20019b), UNHCR (2018) and UNWRA (2019)
2005Notes: Estimates 53.6
58.3
of the migrant stock were4.7
based on the population
of foreign citizens. Refugees were added to the estimates of international migrants. Data on refugees include asylum-seekers. For migrants originating from the same SDG region,
data refer to known origins only.
2010
44.3
4.4
48.7
Number of international migrants and refugees in Saudi Arabia, 1990-2019
International migrants as a share of total population in Saudi Arabia, in
Geography
- ChapterAsia
III :and
Petroleum,
gift 2019
or curse?
:6
2015 Thousands 36.6
4.3
40.9
Northern
Africa (G5)
and Western
in the world,
(percentage)
2020 14 000 33.7
5.2
39.0
12
000
2025
32.9
6.8
39.6
5-9
0-4
Asia
Source: UN DESA (2019a)
Saudi Arabia
Northern Africa and Western
Asia
15
World
Age and sex distribution of international migrants and of the total population
in Saudi Arabia, 2019 (percentage)
Total population
International migrants
Source: UN DESA (2019a)
75+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
10
5
0
Males
Males
5
10
Percentage
Females
Females
Source: UN DESA (2019a, 2019b)
Share of migrants originating from the same SDG region in Saudi Arabia,
compared to the share of within-region migration in Northern Africa and
Western Asia and in the world, 2019 (percentage)
Number of international migrants in Saudi Arabia by top countries of origin,
2019
Pakistan
44.5%
40.6%
India
Egypt
Thousands
26.4%
15
10
5
0
5
10
Percentage
0
500
1 000
1 500
2 000
2 500
3 000
Indonesia
Arabia
TotalSaudi
population
International migrants
Northern Africa
and Western
Males
Females
Asia
Males
Females
World
Bangladesh
Source: UN DESA
2019b)
Source:(2019a,
UN DESA
(2019a)
Source: UN DESA (2019a)
Number of international
migrants working
in Saudi Arabia
Conclusion
on Saudi Arabia’s
forceby:top countries of origin,
2019
As we can observe, Saudi Arabia’s working force population is very particular. While the international migrants as a share of the
Pakistan
total population is of 3,5% on average in the world, Saudi Arabia has about a third of its population coming from outside the
India
Egypt
Kingdom (about
33%).
0
Thousands
500
1 000
1 500
3 000
The population
immigrating
to Saudi2 000
Arabia is2 500
mainly composed
of men, aged between 25 and 55 years old. They mainly come
Indonesia
from India, Indonesia, Pakistan, Bangladesh and Egypt (low or medium income countries).
Bangladesh
Source: UN DESA (2019a)
Having determined the profile Saudi Arabia’s migrants, what can we deduct about the purpose of this migration?
Men, in the prime of life, from low or medium income countries, are looking for work. This is clearly an economic migration.
As a corollary, the Kingdom’s economy relies heavily on foreign workers.
Human migration is not recent. It has been done in all of history. Still, there is more to migration than just the movement of
population. Indeed, migration may take multiple forms, be the answer to various reasons. Let’s have a deeper look into it.
Geography (G5) - Chapter III : Petroleum, gift or curse? : 7