Export market concentration and the potential for export market diversification in the oil and gas sector in a small open economy

Though small in area and population, the US$ 200 billion Qatari economy is open and driven by the oil and gas sector. Therefore the economy is susceptible to economic shocks in international markets. We illustrate the extent of export market concentration for oil and gas exports, identify the determinants of export trade, and evaluate the potential for exports to new markets as a risk mitigation strategy. We used cross-sectional time series data from 2004 to 2014 to develop a measure of export market concentration, and we estimated the determinants of trade using a gravity model. Results show moderate concentration in the gas sector, but extreme concentration in the crude sector. Standard determinants of trade including distance between trading partners, demand drivers like income and population, exchange rates, and perceived corruption in export markets were statistically significant. The inextricable link between the economies of Qatar and the main trading partners Japan, China and India will give rise to negative economic consequences in Qatar in the event of economic turmoil in the large Asian economies. Consequently, Qatar should diversify the export market for oil and gas. Potential markets to enable export market diversification include Czech Republic, Slovakia, Hungary, Luxembourg and Denmark.