The Arabian-American Oil Company - Research Paper Example

? The Impact of ARAMCO on the Saudi Arabian Society Introduction Saudi Aramco, previously known as the Arabian-American Oil Company (ARAMCO) was once the largest American enterprise outside of the US. With the discovery of oil in 1938, Saudi Arabia has grown wealthy from exporting oil which has become the mainstay of the Saudi economy. Saudi Aramco through its management of 98% of the countries oil resources (Jaffe and Elass 2007) has had a significant impact on the Saudi Arabian Society. Saudi Aramco has had a history of improving the lives of Saudis whose livelihood in the past were dependent mainly on agriculture, making oil a very important commodity in the Saudi Arabian economy. Oil currently represents approximately 86% of exports down from 88% in 2003 (Ministry of Economy and Planning 2010). It has led to an improvement in the standard of living of the Saudis and has contributed to every aspect of the Saudi Economy. It has impacted positively on education and training and on the development of the country’s infrastructure. Improvement in the standard of living and the Saudi economy Oil wealth has led to a transformation of Saudi Arabia, a country that was once dependent on agriculture. The standard of living as represented by gross domestic product (GDP) has improved and continues to do so. Saudi Arabia is now recognized as an upper middle income country with per capita GDP at US$15,711 in 2005 (nation master n.d.). The country’s human development index (HDI) which is a better indicator of the standard of living stood at 0.772 in 2006 and placed it at 75th out of 178 countries in 2005 (Nation Master n.d.). The company is now a welfare state which indicates that it provides unemployment and other benefits including retirement to its citizens. These improvements have been driven by oil, both directly and indirectly. The industry triggered the demand for various services and products to both drive the industry and as spinoffs. Jaffe and Elass (2007) states that the petroleum sector represents 40% of the Saudi Arabia’s GDP and is therefore the cornerstone of the economy. This sector is driven by Saudi Aramco which is described by Jaffe and Elass (2007) as the most influential oil company in the world. Saudi Aramco manages 98% of the oil reserves in Saudi Arabian which represents 25% of the world’s reserves (Jaffe and Elass 2007). Between 2003 and 2010 both nominal and real GDP has grown. Real GDP calculated at 1990 prices increased from SR686.8 billion in 2003 to SR869.0 billion in 2010. The only year that experienced a decline was 2008 when it fell by less than SR1 billion. Nominal GDP grew from SR804.6 billion in 2003 to SR1, 630 billion in 2010. Since taking over from agriculture, oil continues to be the main contributor to GDP representing a significant portion of exports. Vitalis (2007) states that in addition to building up the oil industry Saudi Aramco has also provided the expertise and support required to move the Saudi Kingdom out of its backward state by developing and modernizing its agriculture, transportation, education, and health and welfare provision. Impact on education and training Saudi ARAMCO has contributed significantly to the development of education in Saudi Arabia. According to Al Dawood (2010; qtd. in Smith 2010) a major portion of Saudi Aramco’s investment in human resources is reflected in the number of the company’s employees, (including students who are expected to work with Saudi Aramco after graduation) to study at various universities and institutions across the globe. Simpson (2000) also indicates that Saudi Aramco’s pre-university College Preparatory Program (CPP) has made annual contributions to Saudi students studying in Europe and the United States. Although fluctuating from year to year this trend has been on the increase. Despite the fact that growth in oil production has declined (Ministry of Economy & Planning 2010) the company continues to play a positive role. According to VooDooDog (2009) Saudi ARAMCO has commission its services to create animated films in order to educate children from ages 6 to 9 years. These children along with their parents will be educated on matters related to the environment. These films will be shown in Saudi Arabian schools and will also be available on the internet. VooDooDog (2009) also emphasized the role of Saudi Aramco and their concern for the environment. This they described as not only Saudi Aramco’s basic responsibility but has been one of the company’s long standing commitments. Impact in on Saudi Arabia’s Infrastructure According to Jaffe and Elass (2007) the Saudi Aramco has played a significant role in the construction of Saudi Arabia’s infrastructure. Saudi Aramco has supplied refined products from its five domestic refineries to facilitate Saudi Arabia’s construction needs (Jaffe and Elass 2007). The company has further facilitated industrial development by supplying cheap natural gas to Saudi industries such as electricity, water and petrochemical (Jaffe and Elass 2007). In 2009 Saudi Aramco completed the King Abdullah University of Science and Technology (KAUST) a very impressive structure on a vast area of 36 million kilometres representing an international academic city (Sumitomo Corporation n.d.) for the advancement of research and development. Conclusion Saudi Aramco has made a fundamental contribution to the wellbeing of Saudis as well as to the economy in away that has resulted in the country being elevated to an upper middle income country and being ranked highly on the Human Development Index. The economy has grown considerably over the past eight years with only one year of slight decline. Despite, the recent recession the company continues to invest in the education and training at all levels in Saudi society with its recent program being directed towards children from six to nine year old. The county’s infrastructure has improved significantly with the building of roads and educational institutions. According to Al-Mulhim (2010) Saudi ARAMCO has contributed to the wellbeing of Saudis in everyday life. In addition to the improvement in agriculture, Saudi Arabia in the past had one of the best health care systems in the world. Since the 1930’s Saudi ARAMCO has made an indelible mark on the lives of young Saudi’s by contributing significantly to their education. They have improved the physical and social infrastructure by building, roads, schools and educational centres. Additionally, Saudi Aramco has implemented a housing program in the form of a housing plan for employees that is unparalleled by any standard (Al-Mulhim). References Al-Mulhim, A. Dec 31, 2010. What Norway’s Statoil did, that Saudi Aramco could not do http://arabnews.com/opinion/columns/article226689.ece?comments=all Jaffe, A.M. and Elass, J. (2007). Saudi Aramco: National Flagship with Global Responsibilities. James A. Baker lll Institute for Public Policy, Rice University. Retrieved from: http://www.rice.edu/energy/publications/docs/NOCs/Papers/NOC_SaudiAramco_Jaffe-Elass-revised.pdf Ministry of Economy and Planning. (2010). Saudi Arabia: Economic Indicators 2003-2010. Retrieved from: http://www.mep.gov.sa/index.jsp;jsessionid=C3E9A8460081EB1E4ADF24656725CB87.alfa?event=ArticleView&Article.ObjectID=45 Nation Master (n.d.). Saudi Economy Statistics. Retrieved from: http://www.nationmaster.com/country/sa-saudi-arabia/eco-economy Sumitomo Corporation. (n.d.). Infrastructure – Overview. Retrieved from: http://www.sumitomocorp.co.jp/english/business_overview/infrastructure/outline18a.htm VooDooDog (2009) VooDooDog educates on environmental matters with Saudi Aramco. Retrieved from: http://www.voodoodog.com/media/19294/saudi%20aramco%20-%2022012009.pdf Smith, P.A. (2010). Dawood M. Al Dawood. The Middle East June 2010. p. 45-48. IC Publications Ltd Simpson, M. W. (2000) The Sponsorship of Students in Pre-University and University Programmes: Suggestions for International Organizations. Innovations in Education and Training International 37(2) p. 154- Vitalis, R. America’s Kingdom: Myth Making in the Saudi Oil Frontier. Stanford: Stanford University Press Read More