The research question related to the role of oil prices in the economy of the United Arab Emirates cannot be answered without reviewing accurate statistical data and the conclusions of academic researchers with degrees in economics. Due to that, it was decided to choose the method of literature review to approach the question. The articles from peer-reviewed economic journals were located using the method of keyword search and compared in terms of the authors’ perspectives of oil prices in economics.
Judging from modern researchers’ claims and conclusions, the UAE is still an oil-dependent country, but the degree to which oil prices impact economic prosperity is not high compared to other Gulf Countries. Tabash and Khan (2018) list the instability of oil prices among factors impacting the GDP of the UAE and the country’s overall economic health. According to them, the growth of oil prices taking place between 1990 and 2015 has strong correlations with increases in Islamic banking assets during the same period, which has implications for economic development (see Fig.1.).
According to Ahmed (2015), the oil dependence of the UAE is a widely recognized fact, but since 2012, the government has implemented a number of diversification initiatives helping to reduce the trend. Even though the impact of oil prices on the economy is still high, non-oil sectors’ contribution to the country’s GDP exceeds 60%, indicating the UAE’s growing freedom from the oil curse (Ahmed, 2015; see Fig.2).
The idea about the country’s increasing independence from oil prices finds support in other studies. For instance, Mahmah and Kandil (2019) prove that although the fluctuations of oil prices heavily affect direct inward investments, their impact on the country’s non-oil GDP that is still growing is insignificant. Recognizing the effects of the oil price shocks of the past, Vohra (2017) states that the UAE has used the periods of high oil prices to increase financial reserves to help it to maintain stability in case of price fluctuations during the next thirty years.
- Ahmed, A. Z. E. (2015). The role of diversification strategies in the economic development for oil-depended countries the case of UAE. The Business & Management Review, 6(2), 207-216.
- Mahmah, A. E., & Kandil, M. E. (2019). The balance between fiscal consolidation and non-oil growth: The case of the UAE. Borsa Istanbul Review, 19(1), 77-93.
- Tabash, M. I., & Khan, S. H. (2018). The impact of oil price volatility, gross domestic product, foreign direct investment on Islamic banking investments: An empirical evidence of the United Arab Emirates. International Journal of Energy Economics and Policy, 8(5), 306-312.
- Vohra, R. (2017). The impact of oil prices on GCC economies. International Journal of Business and Social Science, 8(2), 7-14.