Question

'Increase or decrease in the oil prices will affect the price of a commodity in the UAE market’. Comment

Answer 1

Answer:

i think no...... because increase or decrease in oil prices doesn't effect on retail price because state government or central government decides the taxes on oil prices

Answer 2

Increase or decrease in the oil prices will affect the price of a commodity in the UAE market

Explanation:

• When oil prices were strong, the United Arab Emirates' government spent heavily in diversifying its economy. A large portion of its economy is now related to non-oil revenues and much more resistant to fluctuation of oil prices. Oil revenues are actually only over 30 per cent of the country's GDP compared to 90% in the 1970s. However, in recent years there have been significant international investments, particularly in the UAE and Saudi Arabia, helping both countries support govt. spending
• However, since oil revenues already account for approximately one third of national GDP, the economic development of the United Arab Emirates could be slow when there is decrease in oil prices. The GDP of the nation may also be slower. But then govt of UAE has always had  some saving measures during this time. In order to save costs, government subsidies for petroleum products are revoked and their prices connected to market.
• Finally, in terms of its potential to maintain declining oil prices in the region for many years, crude oil production has already been characterized in the UAE by lower production costs than global competitors ..

While the above applies to a situation when there is fluctuating oil prices in the global economy due to economic and controllable factors, in case of the present pandemic crisis (uncontrollable factor) where oil prices have steeply fallen, the situation is different for UAE

• The sharp decline in the oil price and the outlook for a price war are considerable downside risks to the the UAE economy  
• Owing to the novel coronavirus, low crude prices are seriously threatening UAE because of which UAE is expected to have lower economic growth rate in the year 2020
• Mainly because of lockdown and shutdown of businesses temporarily there is a glut in supply and low demand from key oil buyers which will impact and hurt the economy very badly