ABSTRACT
The importance of the Gulf Cooperation Council (GCC) countries in the world oil market is evident and can be gauged by a glance at some simple statistics. The depletable nature of oil resources means that each barrel of oil extracted today reduces the number of barrels to be produced in the future by an equivalent amount. Estimates for average income and price elasticities of demand for oil are given as follows: The income elasticity for developing countries is 0.5 to 0.6 in the short run, and 1.3 to 1.9 in the long run. The nature of their economies indicates one common denominator and in the future—oil. In order to reduce significant price fluctuations and to stabilize the real purchasing power of revenues, the GCC should persuade the rest of Organization of Petroleum Exporting Countries (OPEC) to denominate oil in terms of a basket of currencies with appropriate weights reflecting OPEC's import denominations.
