Oman's location at the entrance to the Persian Gulf for centuries made it an entrepôt for trade, including a substantial traffic in arms and slaves. Its prosperity declined in the 19th century, when, as a result of Western dominance in Asia, traditional trade patterns and communications routes were radically changed. Oman's economy then became predominantly dependent on agriculture and fishing.
The situation changed with the discovery of oil in 1964. Production began in August 1967, and by the mid-1970s most of the economy revolved around oil. The hydrocarbons sector accounted for 77% export earnings and government revenues in 2000. Despite diversification efforts, petroleum's share of GDP rose from 37% in 1994 to 38.2% in 1995 to 40% in 1999. In 2000, petroleum's share jumped to 49% of GDP as oil prices rose sharply from near-record lows in early 1999. As of January 2001, Oman's proven oil reserves were 5.5 billion barrels. At the estimated high production level of 959,816 barrels per day in 2001, the reserves would last another 15.7 years. The government's Oman 2020 program looks to a fundamental transformation of the economy by that time. In recent years, the production of natural gas has become a significant factor of the economy. Gas reserves increased from 9.8 trillion cubic feet in 1990 to 29.3 trillion cubic feet 2001, and government predictions are that this will eventually expanded to some 40 trillion cubic feet. in 1999 and are further increasing. Two major extensions of Oman's pipeline connections from gas deposits in the center of the country were completed in August 2002: a pipeline to the north coast at Sohar and a pipeline to the south coast at Salalah. With the recovery of gas prices from in the latter half of 1999, GDP grew at extraordinarily high rates of 15.6% in 1999 and 19.6% in 2000. Inflation was negligible at 0.4% in 1999 and1.4% in 2000.