Oil Discovery in Abu Dhabi
Abu Dhabi, being the capital city of the United Arabs Emirates as well as the second largest city in the country, is one of the leading cities in the country, as well as the Arabic region as well. This is not only due to the fact that it is home to over 621,000 people (according to the 2012 census statistics), but also the fact that it is one of the world’s largest producers of oil, which is the city’s major cash crop that the people of the United Arabs Emirates discovered in the year 1958. However, refining and extraction of this oil did not commence, until the following year, 1959, which has made the city one of the largest oil producers across the world. As a result, it has also grown in terms of finances and provision, considering that it contributes to over 56.7% of the United Arabs Emirates’ Gross Domestic Product (Tainter, 2011).
Apart from other businesses that the city is has been engaging itself in such as the pearl trade as well as the trucial coast businesses, Abu Dhabi has heavily invested and concentrated on its oil business, which is the greatest source of income, not only for the city, but also the United Arabs Emirates at large. Oil was first discovered in Abu Dhabi in the 1930s as the pearl market and trade in the city declined. This was an alternative way through which the city would continue to maintain a stable economic income, and as a result, the Petroleum Development Trucial Coast (PDTC) resulted. This was a truce agreement between the country and the Iraq Petroleum Company.
According to Warren (2012), after signing the concession with the Iraq government and the British Oil company in January 1939, this is when drilling of the oil officially started, from a depth of about 2,669 meters. However, one essential thing to note is the fact that as much as oil was discovered in Abu Dhabi in the early 1930s, this was not the first region for oil discovery, considering the fact that Iraq was already drilling and controlling oil. At the same time, all oil was by then controlled by the British Petroleum under the British Government. However, rights were then transferred to the respective governments that sought to drill oil in their countries, such as the United Arabs Emirates and the Iraq government, earlier on. The United Arabs Emirates was, therefore, not able to drill oil until the year 1939, after signing the concession (Warren, 2012).
Peak oil is one of the debates that have been currently going on across the globe, especially in the last decade of the twentieth century and the current twenty first century, according to Biewick & Coleman (2011). This is because there are fears that oil will finally diminish in the gulf, after the region, United Arabs Emirates included, reach their maximum levels of oil extraction. It had already been estimated in the twentieth century that with the ongoing oil extraction in large quantities (due to the increasing levels of oil demand from various regions across the world), there will be oil diminishing by the year 2036 (Biewick & Coleman, 2011).
For example, according to the British Petroleum statistics, there were extremely high levels of oil in 2011 in comparison to the year 2005, when the rate of oil extraction stood at 74 mb/d, as agreed in the January 1939 Petroleum Development Trucial Coast (PDTC) concession. From this discussion came the Hubbert curve, through which the countries in the gulf region should adopt in their oil extraction. Otherwise, M. King Hubert maintains and demonstrates that there will be no oil at all by the year 2200 if the gulf region maintains its current levels of oil extraction.
It is necessary to note that oil and petroleum products are some of the gulf region’s largest sources of income. This means that the gulf region heavily relies on oil exportation, as it contributes greatly to these particular countries’ gross Domestic Product. This is both an advantage to the countries, as well as a disadvantage. From an analysis of the United Arabs Emirates, for example, it is clear that petroleum products are the region’s highest contributors into the government, whereby over 67% of the country’s Gross Domestic Product is oil as well as its subsequent products, such as gas. At the same time, the country does not have many strong and consistent sources of income apart from oil, and this has been the case for long because apart from oil, the country has only been the pearl trade in a consistent manner, which declined in the early twentieth century.
After the oil prices hit a historic $145/barrel in the year 2008, many economists and strategists including Hubbert sought to find a solution to the escalating oil prices. The United States Government released an official report saying that car manufacturers as well as fuel producers should seek an alternative to petroleum, and since then, ethanol has been on experimentation. If this turns out positively, the demand for oil will go down even before the predicted time, 2036, and this might highly affect the United Arabs Emirates’ economy. In order to address the same, the UAE should seek an alternative to oil as a contributor of its Gross Domestic Product and revenue; otherwise the countries in the Gulf Cooperation Council (Qatar, Kuwait, Saudi Arabia, Bahrain and Oman) will face financial challenges sooner than expected (Salhani, 2010).