Influence of Oil Factor on Economic Growth in Oil-exporting Countries

Abstract

Traditional types of energy resources, among which oil is primary, have a huge influence on economic development in various manifestations. In our research, we discuss dependence of economic growth in oil-exporting countries on first-order factors, such as oil prices, oil production, and structural shift in a share of oil exports. To review 2005-2019, we chose leading oil-exporting nations, including the OPEC members (Iraq, Iran, Libya, Saudi Arabia, and Nigeria), as well as countries outside this group (Russia, Kazakhstan, Azerbaijan, and Norway). Having used statistical and regression techniques, we confirm that the correlation between oil price fluctuations and economic growth raises with the scale effect. Larger economies (by absolute GDP in oil-exporting nations and hydrocarbon production) might generate more intensive economic growth from positive changes in oil prices than small economies. Also, the OPEC members show the strongest structural shifts in the change of the share of oil exports than the other countries. Resulting regression dependences led us to the conclusion that in oil-exporting countries, economic growth largely depends on an increase in oil prices and changes in oil production rates. But contrary to the expectations saying that in time of downturns, as far as global oil prices fall, nations will reduce oil exports, we observe the reverse picture – changed role of the price factor. We explain this with the keeping income-balance strategy, where the oil price parameter is a tool to choose ideal production. Our findings show that with the 1%-increase in oil production, the countries under considerations (the OPEC members) might reach GDP from 0.0367% (Iraq) to 0.437% (Libya). For countries outside OPEC, such a GDP growth might be more intensive. For instance, in Russia, it might be up to 1.559%. This also points out that the joint coordinating policy in oil production affects the economic growth potential.