Ending Oil Dependency will Mean Big Changes in Saudi Arabia
Saudi Arabia has released details of its Vision 2030 – an immensely ambitious plan that Salman says will end the Kingdom’s dependence on oil by 2020.
Category: Saudi Arabia
Overcoming Saudi Arabia’s Oil Dependency
On Monday, Saudi Arabia released a blueprint for the future, a plan for the Kingdom that could alter the course of its history. The “Vision for the Kingdom of Saudi Arabia” could radically transform Saudi Aramco, the Saudi economy, and the country’s social structure.
Potential Saudi Responses to the 9/11 Bill
Discussion continues among investors about of New York Times report last weekend in which a Saudi official threatened to sell $750 bln of US Treasuries and assets if a bill that would allow families of victims to sue the Saudi government for involvement in the 9/11 terrorist strike.
IMF: Austerity Looming for Saudi Arabia
The International Monetary Fund (IMF) recently issued a warning to Saudi Arabia regarding its spending vis-a-vis its primary source of income. The major oil producer is feeling the pinch of lower global oil prices, and the IMF predicts years of higher taxes and low fuel subsidies for the Middle Eastern nation. Around the world, crude oil prices have fallen more than 70% over the last 18 months. As a result, a number of economically weaker oil-reliant countries will likely soon begin defaulting on national debts.
Saudi Arabia Makes Energy Cuts in Preparation for Lower Oil Prices
The Saudi monarchy plans to overproduce oil to maintain market-share, but the state will have to make cuts to compensate for the supply glut, according to Arabian Business. The government will lower government projects to 840 billion riyals in 2016, a step back from the 975 billion riyals seen from 2015, and it will slash 15 percent of the 2015 GDP. Authorities will also increase prices for such necessities as fuel and water.
Saudi Arabia Struggles to Adapt to Economic Realities
According to Deputy Crown Prince Mohammed bin Salman, Saudi authorities consider cutting subsidies for energy and water, a sign that low oil prices continue to burden the economy, according to Reuters. Salman believes oil prices could fall below $45 a barrel, which explains why the government embarked on various projects in the form of natural gas and nuclear investments. Officials also plan to tax unhealthy foods and raise more revenue by privatizing mines and public lands. The Kingdom derives 80 percent of total revenue from the oil market.
Drowning in a Strategy
Saudi Arabia has long enjoyed the status of being the top crude oil exporter in the world. With record production of 10.564 million barrels per day in June 2015, Saudi Arabia has been one of the major driving forces behind the current oil price slump.
The Saudis have kept their production levels high since last year in order to drive other players (especially U.S. shale drillers) out of business. Equally clear is the fact that this strategy of maintaining the glut and driving out rivals has not worked so far.
Saudi Arabia Waits out the Competition
The undisputed king of oil and gas is making some moves that could change the face of the global refining sector.
In June 2015, Saudi Arabia pumped a record 10.564 million barrels a day. As if being the world’s biggest exporter of oil was not enough, the desert kingdom is now looking to conquer the refining sector, as it has quickly become the fourth largest refiner in the world.
Saudi Economy Expected to Grow in 2015
Despite the shock of low oil prices, Saudi Arabia’s real GDP expects to grow 3.5 percent for 2015, according to the Saudi Gazette. Increased spending and oil production will continue to advance the economy, but growth will slow down in 2016 as lower oil prices affect spending.
Is Saudi Arabia’s King Salman Up to the Task of Economic Reform?
Ever since its unification as a nation state in 1932, the Kingdom of Saudi Arabia has been an oil-dominated economy. Most improvements and setbacks in its economic and social indicators can be invariably traced to the ups and downs of the oil market.
While that kind of volatility in revenues is unhelpful, dependence on petroleum would not ring too many alarm bells if it was sustainable. But it is not. Oil and the revenues it generates – 90% of all government income – will dry up at some point in the future, and the economy could collapse unless it diversifies.
