The Externalities of Petroleum Sector in Saudi Arabia Term Paper

The Externalities of Petroleum Sector in Saudi Arabia - Term Paper Example The production of petroleum accounts for one of the most environment-polluting activity around the globe which results in adverse side effects on the environments ability to support life. The same activity, however, accounts for the greatest revenue generating activity for major oil producing countries of the world including Saudi Arabia. The production of petroleum thus can be said to impact both positively and negatively on both people and the environment. Saudi Arabia is the leading oil producer and exporter in the world. With its petroleum-based economy, Saudi Arabia’s oil accounts for about 75% of the government revenues and 90% of the country’s total exports. The petroleum sector in Saudi Arabia contributes about 45% of the country’s Gross Domestic Product compared to the 40% contribution by the private sector (Alshehry and Belloumi, 2015). The Per Capita GDP in the country is estimated at $20,700. Despite the efforts for diversification in the petrochemical sector, the economy of the country remains highly dependent on oil in the second decade of the 21st century. As of 2011, Saudi Arabia produced approximately 10.782 million barrels of petroleum daily with a greater portion being exported. Domestic consumption of oil to generate electricity has been on the increase over the years. The country has the largest crude oil reserves in the world that account for about 18% of the world reserves as reported by the O rganization of Petroleum Exporting Countries. Saudi Arabia can economically be said to be a rentier state given that it depends on externally generated rents as opposed to the surplus production of its population. The categorization of the country as a rentier state is evidenced by the percentage of its petroleum rents in terms of total government revenues. As a rentier state, the rent-seeking behaviour is characteristic that cuts commonly across the public and private sector (Al-Thukair, Abed and Mohamed, 2007). The