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Do Oil Prices influence Non-Oil Sector Stocks in Saudi Arabia? - Research Paper Example
Author : simeonschumm
Finance & Accounting
Pages 10 (2510 words)
Do Oil Prices influence Non-Oil Sector Stocks in Saudi Arabia? Name University’s Name Table of Contents Abstract Introduction Oil is one of the most important economic resources in global economy today. Fluctuations and shocks in oil prices have been studied extensively by many leading economists…
Saudi Arabia has proven oil reserves of 264.52 billion barrels of oil (OPEC, 2011) and recently surpassed by Venezuela who claimed their oil reserves had risen to 269.5 billion barrels of oil. In terms of oil production, Saudi Arabia has a quota allocation of just over 30% of production among Organisation of the Petroleum Exporting Countries (OPEC) countries. The Saudi Arabian oil production in 2010 was 9.1 million barrels per day which accounted for 13% of world’s total oil production. Oil is the major driver of economic activity in Saudi Arabia. Oil related activities accounted for 47% of the GDP in 2010 (MoF, 2011), and petroleum products exports amounted to $193 billion and accounted for 84% (by value) of total exports in Saudi Arabia (OPEC, 2011). Therefore, oil prices play a vital role in the Saudi Arabian economy. However, from the perspective of an investor or an enterprise in Saudi Arabian market, it is also important to know whether oil prices have a major role to play in stock prices of non-oil sector companies too. If there is a high positive correlation between oil prices and non-oil sector stocks, an investor can use these stocks to hedge on their investments in oil. ...