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Complete 2 pages APA formatted article: Critical thinking Mo. Critical thinking Mo For the last few years there have been drastic price fluctuations in the oil market globally, which has been caused b
Complete 2 pages APA formatted article: Critical thinking Mo. Critical thinking Mo For the last few years there have been drastic price fluctuations in the oil market globally, which has been caused by the economic depression, the prices have gone to a high of $150 dollars per barrel and have dropped to just $30 per barrel( Gulf business, n.d p51). Due to the importance of oil in the global economy, this has caused ripple effect to other sectors in the economy since currently oil is the basic source of energy in the world especially the industries that rely heavily on oil for their operation. This uncertainty has spread over to the financial sector which is directly involved in the oil industry. Some of the banks that have been affected by the uncertainty in the oil industry are those from the European Union, America and from the oil producing countries, however, banks in the United Arab Emirates have remained relatively stable especially in the bleak outlook of oil industry of 2011.
Revising down of the economic outlook of the growth of OPEC countries from 3.7 to 3.6 was an ill advised idea, this is because that made the stakeholders get an escape path from being innovative and implementing structures that would have ensured that the growth rate is maintained even in the reduction of global demand for oil and oil products. Looking for other ways to diversify risk and cushion the economies would have produced better results than just revising down forecasts for growth.
Investments in the oil industry are a key in ensuring stability in oil production and the $300 billion the OPEC member states have set aside for upstream investment in the oil industry is a right step in the right direction. Ensuring constant supply of oil and maintaining a reserve potential will enable the OPEC countries to be able to regulate prices from rising too high or going down too low.
The idea of United Arab Emirates bank having weathered the economic crisis of the euro zone that happened in 2011 being solely dependent on internal structures to manage their risk preparedness is far-fetched and cannot be solely relied on to explain the stability. This is because the country, which exports second hand goods to Africa, has a significant part of its economy being driven by these exports. banks’ diversifying their products to this sector was also a contributing factor that made them more stable amidst the euro zone crisis. However, internal structures are needed in the banking industry of the oil producing countries especially those that have no other source of revenue to drive their economy and failure to this may see them not able to overcome effects of fluctuations in the global oil prices.
Performance by banks from the oil-producing region will be affected by the crisis that was there in the European countries however that will not to a much extent affect their growth patterns as the demand for oil will be driven by the developing countries in Africa. This is because African countries were relatively stable in the recent global economic crisis and whose demand for oil to further their industrialisation programs have been on the rise for the past few years.
References
Gulf Business. .E Abdul Aziz Al Ghurair, Chairman, Mashreq.
