Exploring causal relationship between security of demand for crude oil and economic well-being : the case of five MENA exporting countries

Abstract

Exports of crude oil account for one-third of the combined Gross Domestic Product (GDP) of Middle East and North Africa (MENA) region and two-thirds of their total exports. The economic crisis in Euro-zone and decelerating economic growth in emerging markets in Asia have led oil exporters from MENA to focus on security of demand for their exportable quantity of crude oil. Oil security in international relations theories is related to a number of approaches, which are often overlapping and coexistent. The general perception (hypothesis) about oil security from the oil exporters’ perspective is that, it is closely associated with uninterrupted exports (demand) of their produced oil at a reasonable price for economic well-being (security) of its citizens. Therefore, the theorisation of ‘security’ for oil exporters would generally involve proving empirically, the influence of crude oil exports on economic well-being of the citizens. There is restricted amount of literature that empirically tests how the dynamic change in export quantity of crude oil affects economic well-being of the citizens of oil exporting countries of the MENA region. This paper is an attempt to fill this literature gap by finding the causal relationship between oil export quantity (proxy to oil security) and per capita GDP (proxy to economic well being), of the top five crude oil exporters of MENA region, namely Saudi Arabia, Kuwait, Iraq, Iran and UAE in order to consolidate or contradict the general perception of oil security from the net oil exporters perspective.