Portfolio Project (International Economics): Oil Price Plunge and the Middle East Name Course Instructor Date Background The recent plunging oil prices from June 2014 has highlighted the fragility of oil dependent countries, since, oil is the biggest component of revenue. The effects of declining oil prices in the Gulf Cooperation Council Countries GCC countries are likely to increase government borrowing to continue with government spending in the face of falling oil revenues. This further highlights the impact of oil prices on the balance of payments in the GCC countries, and the need for diversification as a strategy to improve their economic outlook. The GCC growth approach has focused on using oil revenue to improve infrastructure, education and health while also increasing employment in the public sector (IMF, 2014). Nonetheless, there is exposure to volatility of oil prices that undermines this growth approach that would be more sustainable when oil prices decline over time. The Middle East and oil prices The plunge in the oil prices has affected the revenues and budgetary allocation in the GCC countries, which rely on petroleum on economic performance. Crude oil is an important product to the economies of the GCC countries in the Middle East. Hence, account balances of these are running low and there is pressure for the countries to diversify reform t
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