Examining the Effects of Oil Exploration on Saudi Arabia's Economy

This report investigates the impact of oil exploration on key macroeconomic factors in Saudi Arabia, utilizing secondary data and statistical tests such as Granger causality, unit-root tests, co-integration tests, VECM, and VAR models. The analysis covers the period between 2008 and 2019, examining the relationship between oil exports, GDP, unemployment, inflation, and the stock market. Key hypotheses explore the effects of oil exploration on unemployment rates, GDP growth, stock market performance, oil prices, and inflation. The study assumes that oil exports are a major foreign exchange earner and directly influence macroeconomic factors. Distribution statistics for unemployment rate, GDP growth, oil export volume, and average oil prices are presented. The report also includes statistical tests like Vector Auto Regression and Vector Error Correction models to analyze the relationships between variables such as exports, oil industry prices, unemployment, and oil exports. The findings suggest a strong correlation between oil revenues and economic development in Saudi Arabia.

Methodology
In order to answer our statistical questions, we collected a number of data-sets from
secondary sources. We will therefore be able to test our statistical hypothesis
following our data analysis.
For each of the five factors of interest, we will conduct:
i. Causality tests (Granger causality test)
To determine whether oil exploration causes other macroeconomic factors and vice
verse.
During the season, the average annual output of oil is almost 80 million barrels, which
is 18% in the first phase and during the third period, the volume is about 20%
compared to the second phase. However, during the fourth phase it is reduced by 27%
compared to the third period. The slump is due to the fact that economy has been
shown to reduce the imbalance in the economy, which has had a great effect on gross
domestic product, which has focused almost 14 percent in the fourth quarter.
Although gross domestic product has grown from $ 32.94 billion. The average dollar
for almost $ 40.77 billion. The US dollar in most of the three quarters was almost
25% more than the first time.
ii. Stationarity tests (Unit-root tests)
To test the nature of the macroeconomic factors
iii. Co-integration tests
To test for a long-run equilibrium relation between Oil exploration and other
macroeconomic variables such as economy growth, I.e. does Oil mining and export
affect the GDP in the long run, say 20 years?

iv. Vector Error Correction Model (VECM)
To determine the relationship between Oil exploration and other macroeconomic
variables
v. VAR Model
For macroeconomic data description and performing of causal inference between oil
exploration and other macroeconomic factors.
We will then analyze the test statistics and draw conclusions that will be used to test
our hypotheses.
Data
Based on the above fact, an indication of an oil-dependent economy, said that the
characteristics of choosing a GDP per capita and government revenues would cost the
total value of exports and imports closely linked to changes in oil and oil prices.
Between 2008 and 2019, the average of the relationship between the benchmark
development index of oil prices and economic development outlook was 0.8
Our data includes: Unemployment data from Saudi Arabia, Yearly Oil volume
exports, Saudi Arabian GDP score and growth, internal and external oil price
Economic development depends heavily on the final export value. The cost of
creating the index has identified the relationship between changes in the value of oil
exports on the one hand, and changes in the value of gross domestic product, which is
gross domestic product by government revenues and exports, have reached a gain of
about 0.9,

Hypotheses:
Unemployment rate against Oil exploration
H0: Oil exploration has no effect on unemployment rates in Saudi Arabia
H1: Oil exploration has a significant effect on unemployment rates in Saudi Arabia
H1 There is an important link between oil exports and economic growth in the
economy.
H2: The economy is heavily dependent on oil exports for most of its revenue. H3:
Any increase in oil prices has always led to a positive growth in the economy.
H4: Global crude oil prices have a direct impact on GDP. H5: Oil investment is
promised in terms of oil revenues.
H6: Oil and gas trade is affected by oil revenues.
H7: Increasing oil exports will lead to increased government budgets. This will lead to
increased spending and spending in many sectors such as the social economy
GDP and Oil exploration
H0: Oil exploration has led to growth of the Saudi Arabian GDP
H1: The Saudi Arabian GDP growth has not been affected by the oil exploration in the
country
Effect of Oil exploration on the Stock Market
H0: Oil exportation from Saudi Arabia has significant effect on the stock market
H1: Oil exportation has no significant effect on the stock market
Oil prices in Saudi Arabia and the Oil production in Saudi Arabia

H0: The oil Industry prices have considerable influence on the Saudi Arabian oil
mining and exportation
H1: The oil Industry prices do not have influence over oil exploration and exportation
activities in Saudi Arabia
Oil exploration and Inflation
H0: Oil production and exportation in Saudi Arabia has significant influence on
inflation
H1: Oil production and exportation in Saudi Arabia has no significant effect on
inflation rates in Saudi Arabia
Additionally, we will explore the distribution of the five macroeconomic factors from
the previous years to 2017. Therefore, apart from the aforementioned statistical tests,
we will explore the distribution statistics of the macroeconomic factors in the Saudi
Arabian economy.
Assumptions
During our data analysis, we make several assumptions. Which include:
i. Oil exports from Saudi Arabia are the major foreign exchange earner for the
country
ii. Oil exploration has a direct effect ona number of macro-economic factors such as
employment rate, inflation rates, and the GDP growth of Saudi Arabia.
Additionally we assume that Oil exploration is affected by macro-economic
factors such as the price of Oil in the Oil mining industry
iii. The sample size period is representative of the whole population

Results
Distribution statistics
Unemployment rate
Variable Obs Mean Std. Dev. Min Max
year 19 2008 5.627314 1999 2017
Unemployment rate 19 5.488495 .5076645 4.3451 6.254306
The average unemployment rate of Saudi Arabia from 1999 to 2017 is 5.4495
Stand. Dev. Of unemployment rate = 0.570496
Graph for distribution of unemployment in Saudi Arabia

4.5 5 5.5 6 6.5
Unemployment
2000 2005 2010 2015 2020
Year
Another format maybe?

GDP growth rate owing income from Oil production in Saudi Arabia
Variable Obs Mean Std. Dev. Min Max
Year 20 2009.5 5.91608 2000 2019
Saudi Arabia GDP
growth
20 2.00288 6.362119 -9.5449 17.409

-10 0 10 20
GDP growth
2000 2005 2010 2015 2020
Year
Gross Domestic Product growth trend
Saudi Arabia Oil export Volume
Variable Obs Mean Std. Dev. Min Max
year 20 2009 5.91608 2000 2019
Oil export 20 9129390 915089.5 7090000 1.05e+07

7000000 8000000 9000000 10000000 11000000
Export volume
2000 2005 2010 2015 2020
Year
Saudi Arabia Oil exports
Average oil prices
Variable
Ob
s
Mean Std. Dev. Min Max
year 12 2013.5 3.605551 2008 2019
priceperba
~l
12
80.7166
4
17.37719
37.611
4
106.2002

40 60 80 100 120
Price
2005 2010 2015 2020
Year
price per barrel
Average oil prices
Distribution of oil exports for a given price
Variable Obs Mean Std. Dev. Min Max
year 12 2013.5 3.605551 2008 2019
priceperba~l 12 80.71664 17.37719 37.6114 106.2002
exports 12 9568983 744367.9 8170000 1.05e+07
Mean of export = 9312546
Std. Dev. Of exports = 750876.5
Max. Price per barrel = 101.12