The Effect of Oil Price Changes on Stock Markets of the GCC (Research Paper Sample)

The Effect of Oil Price Changes on Stock Markets of the GCC
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Executive Summary
The dominance of the GCC region in the oil industry has been steady and existence for many years. The region being the largest oil producer in the world, thus the ability to manipulate the oil prices to their advantage. Consequently, the nations in the region have recorded massive economic generation from the oil industry. However, the past years has created changes that are less desirable to the GCC nations. The rest of the globe has, however, benefited massively from the changes considering that the price of oil is at a record low.
Table of Contents
Introduction……………………………………………………………………………4
How GCC stock markets behave as a response of the movements in oil prices………4
The Effects on the Qatar Exchange ………………………….………………………..5
Recommendations……………………………………………………………………...6
Conclusion……………………………………………………………………………...6
References……………………………………………………………………………...8
The Effect of Oil Price Changes on Stock Markets of the GCC
Introduction
The value of oil and oil products has been significant mainly to oil producing nations. Specifically, the nations in GCC have benefited massively from the oil trade. The nations in the region have enjoyed monopoly based on that they have been the global leaders in the oil industry. This allowed for manipulation of oil prices. Recently, the oil industry has benefited the global market almost equally with country in the GCC recording record low income from the oil industry. In addition, the value and price has reduced significantly over the past year. In providing a numerical representation, the value of oil has reduced by 40% in the past year.
To the rest of the globe, majorly consumers, the trend has been highly beneficial considerable the low price of oil and its products. To its producers, majorly countries in the GCC, this has significantly hindered their economic income. In an argument by Arouri, Bellalah & Nguyen (2011) these adverse changes has been experienced in the GCC countries for the first time since their escalation to supremacy in the oil industry. For this reason, the strategies required to reverse the trend have not been successful. How much are GCC countries impacted by the changes in the industry?
How GCC Stock Markets Behave as a Response to the Movements in Oil Prices
The GCC comprises of six nations that massively produce oil. The nations are Qatar, Kuwait, Bahrain, Oman, United Arab and Saudi Arabia. The combination of the six nations produces massive volume of the global oil. The nations contribute 20% of the global oil. This makes the region the largest oil producing region across the globe. The GCC also has on its exposure the largest global oil reserves. The reserves constitute of 47% of the global oil reserves. From an economic perspective, the GCC controls 36% of the global oil exports (Arouri, Bellalah & Nguyen, 2011). The GCC region has the largest economic generation from the oil business than any other region or nation across the globe. For this reason, the past year changes in the oil industry in regards to price changes has had a significant influence to the stock market of the GCC countries.
In an argument by Arouri, Bellalah & Nguyen (2011) the changes on the oil prices in GCC countries directly reflect on the stock market. The author further point out that the fall of the oil prices over the past years has decreased the stock income of GCC countries. The changes on the stock markets are further made significant by the fact that the economy and stock are directly and indirectly influenced by the oil industry. The GCC nations have massively developed their oil industry. Numerous industries in the regions have affiliations to the oil industry. Arouri, Bellalah & Nguyen (2011) assert that major industries across the GCC region depend on the income generated from the oil industry. For this reason, the slightest change in the oil industry directly affects the economic income of these industries. In addition, the investment participation from stakeholders in the oil industry has also reduced across the region. The combination of low investments, poor economic income from in industry and low income from oil exports, the stock in the GCC countries has dropped massively.
The Effects on the Qatar Exchange
From the countries in the GCC Qatar benefits the most from the oil industry. The nation is also the leading nation in regards to beneficiaries across the globe. A 22% market capitalization is generated from listed companies in the oil industry. There are a total of 40 listed companies in the oil industry in Qatar. The comp...