Exploring the impact of oil revenues on OPEC members' macroeconomy

• Published date: 01 December 2013
• DOI: http://doi.org/10.1111/opec.12014
• Author: Usama Almulali,Che Normee Binti Che Sab
• Date: 01 December 2013

Exploring the impact of oil revenues on

OPEC members’ macroeconomy

Usama Almulali* and Che Normee Binti Che Sab**

*Research Fellow, PhD, Center for Real Estate Studies (CRES), Faculty of Geoinformation & Real Estate,

Universiti TeknologiMalaysia (UTM), 81310 Johor, Malaysia. Email: usama_81z@yahoo.com

**Lecturer of Economic Section, Universiti Sains Malaysia, 11800 USM, Malaysia. Email:

csnormee@usm.my

Abstract

This study investigated the impact of oil revenues on the macroeconomy in the Organization of

Petroleum Exporting Countries (OPEC). The panel model was used taking the period 2000–2011

when oil prices increased to high levels causing an increase in the oil revenues of the investigated

countries.The results showed that oil exports revenues have a long-run and a short-run positive rela-

tionship with the gross domestic product, domestic investment, government consumption expendi-

ture and the consumer price index. However, the results also showedthat oil exports revenues have a

long-run and a short-run negative relationship with the real exchange rate, gross domestic savings

and the current account balance. Therefore, it was recommended that these countries should reduce

their level of domestic consumption and increase their domestic savings. It wasalso recommended

that these countries should reduce their real exchange rate appreciation and use more flexible

exchange rate regimes.

1. Introduction

The Organization of the Petroleum Exporting Countries (OPEC) witnessed a rapid

increase in oil prices during the period 2000–2011 causing high level increase in their oil

revenues.The increase in oil prices might have a huge impact on the macroeconomic vari-

ables as a number of studies examined the link between oil prices and macroeconomy.

However, the previous studies did not cover the period 2000–2011 in OPEC; thus, the

major goal of this study is to explore the impact of the last oil price shock on the macr-

oeconomy in OPEC, excluding Iraq due to lack of data availability.

Oil price volatility has caused many fluctuations in the macroeconomy of different

countries and regions; thus, the relationship between oil prices and the macroeconomic

variables attract the attention of manyresearchers. A large number of studies examined the

impact of oil prices shocks on the macroeconomic variables. An example was the huge

impact that oil shocks had on the output growth in Saudi Arabia, Iran and Indonesia

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© 2013 The Authors. OPEC Energy Review © 2013 Organization of the Petroleum Exporting Countries. Published by

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