While the United Arab Emirates (UAE) stands tall on the global map today as an epitome of modernity and wealth, the transformation of this region began back in the 50’s when oil was discovered beneath the desert sands. Dubbed “black gold”, Oil has singlehandedly transformed the UAE economy from a desert society to one of the fastest growing economies in the world. It is safe to say that oil has driven the transformative processes of the UAE and without its oil reserves the country would not be where it is today.
Shifts in the Desert
Prior to the discovery of oil, UAE traded in pearls, fish, and had a thriving fishing economy. Discovery of oil in Abu Dhabi in the year 1950 marked an economically progressive era for UAE, which first exported oil in the year 1962. The late 70s is when the UAE saw a massive influx of wealth which aided the formation of world class infrastructure that continues to propel the UAE today.
Fueling Economic Growth
The UAE was able to spend on modernizations and builts state of the art airports as well as iconic skyscrapers that have come to symbolize the UAE on the world stage due to the oil revenue streams. Oil exports allowed the UAE to rapidly progress and invest in healthcare, education, and infrastructure to ensure there was economic prosperity in the longterm.
The UAE’s leadership exhibited wisdom by reinvesting the oil wealth into diversifying their economy to make sure that UAE will not be overly reliant on oil in the future. The creation of sovereign wealth funds like ADIA allowed the government to make investment abroad which strengthened the economy.
Oil’s Role in National Development
The contribution of oil for the UAE economy was not only in revenue generation, it also contributed to the development of the economy. While generating revenue, the oil sector also helped fund and develop important infrastructure like highways, schools, hospitals, and advanced industries. Abu Dhabi that has the largest share of oil reserves in the UAE has also been able to invest in technology, renewable energy, and real estate while contributing to the UAE oil wealth.
UAE is now a global powerhouse because of the oil sector during the OPEC era. The US appears to be benefiting the most from the current price war affecting the economy, production, and shipping of oil with other countries like Iran and Venezuela. Other countries in the Middle East and North Africa will have to reorganize their countries and do a full makeover to oppose this powerhouse.
Since oil is not as important of a resource anymore, the UAE began strategizing a way to not restructure their economy around oil. The UAE anticipated the risks caused by oil price rises and lower demand and formulated a plan to diversify. UAE employed an aggressive strategy in diversification to soften the impact of oil price increases. Dubai transformed itself from an oil reliant resort into an economic powerhouse proficient in medicine, technology, and real estate.
The UAE’s diversification strategy sure did work. Non-oil sectors today are over 70% of the country’s GDP, and oil’s contribution to this figure is less than 1%. The country’s vision for the future is what ensures it remains resilient and adaptable in a changing global economy.
The United Arab Emirates Oil Future
The UAE continues to be on the forefront of oil production and has set goals for renewable energy and sustainability. Projects within Abu Dhabi like Masdar city and Mohammed bin Rashid Al Maktoum Solar Park showcase these goals and the commitment towards reducing reliance on fossil fuels and investing cleaner energy sources.
For the foreseeable future, oil will remain an integral part of UAE’s economy. The country has developed new technologies for more efficent oil extraction and processing, and so the resources can keep driving growth. The UAE’s role as an oil supplier is crucial, and so its contribution will always be needed.
Conclusion: The Lasting Impact of Oil
The economical growth of The UAE can be traced back to the oil industry. This “black gold” has transformed the country from a modest trading hub to one of the wealthiest and influential nations in the world. Oil has negatively impacted the UAE’s population, as it remains the base around which the economy is centered. However, looking towards the future, the UAE has begun to strategically shift toward diversification and construction of renewable energy plants around the country which ensures that while oil remains central, the economy can thrive in a developing global world.
The black gold which previously shaped the economy of The UAE will continue to be a point of focus, but with continued vision and ambition from the UAE’s leadership, the UAE can remain a dominating tower of economic growth for years to come.
