Why Kuwait is so Rich
INTRODUCTION
Oil producing countries benefit from their natural resources based on the world’s reliance on petroleum products for fuel, industrial raw materials, petrochemical by-products, and plastics. Kuwait is one of the largest oil-producing countries in the world based on estimates that it has 10% of the world’s oil reserves. Therefore, such vast natural resources compared with its small demographic cross-section make it inherently rich. Additionally, the country’s government has established a tax-free regime which ensures that innovative and enterprising citizens get to keep almost all their wealth. The results are that Kuwait’s citizens, as well as the country itself, are very rich. This essay investigates the reasons why Kuwait is so rich based on its vast oil reserves, the small population, a tax-free regime, its unique geography, the strength of its currency, and incentives by the government for professionals.
WHY KUWAIT IS SO RICH
Oil Reserves
Kuwait is positioned in the Middle East, where some of the world’s largest oil reserves are found. Countries such as Saudi Arabia, Kuwait, Iraq, and Iran are all found in this same oil-rich region, and it is no surprise that they too are very rich. However, Kuwait’s oil reserves are some of the world’s largest based on estimates done in 2016. The country comes only sixth after larger countries with vast oil fields such as Venezuela, Saudi Arabia, and Iran. According to 2016 statistics, Kuwait’s daily production of crude oil was around 3 million barrels (Mirzaei and Al-Khouri 95). Such a huge amount of crude oil from the country translates to huge financial gains putting in mind that the price per barrel for the year was around 50 US dollars. Therefore, on a daily basis, Kuwait was earning approximately 150 million US dollars from the production of crude oil.
Crude oil is a good source of wealth for the Middle Eastern countries. However, the by-products of fractional distillation after the crude oil is processed have more money than its unprocessed forms. Usually, the first by-product of crude oil is fueling which include aviation fuel, diesel, premium gasoline, bitumen, and even natural gas. Other by-products such as petroleum waxes go into the production of industrial raw materials for the plastics and petrochemical industries (Alsharif, et al. 156). Using the most precious of these by-products which is the fuels, Kuwait earned a lot of money from this critical commodity. First, the country has several petroleum processing facilities to process some of its crude oil into more valuable compounds. There are three main refineries in Kuwait which process between 30,000 cubic meters and 75000 cubic meters of crude oil (Mirzaei and Al-Khouri 98). One more is under construction and will be commissioned in 2020. Primarily, the country exports crude oil earning more than 25 billion dollars per year, processed petroleum products which makes it more than 7 billion dollars annually, petroleum gas earning it more than 1.5 billion dollars every year, as well as complex hydrocarbons for the petrochemical industries which earn Kuwait more than 2 billion dollars annually. These statistics explain why Kuwait is one of the top 50 most significant and most lucrative economies in the world.