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. Title 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