Category Archives: Saudi Empty Pockets

Saudi Arabia Oil Riches Decline Force Social Change

Saudi Arabia Amid Change- 95th Issue

Introduction…This blog has been documenting the shift in economic power from OPEC and its partners, to the frackers in the United States.  Even at a $50 per barrel price, plus or minus, U.S. producers have cut production cost nearly in half and billions of dollars are pouring into new production.

But, in Saudi Arabia, the low energy prices have forced painful change even in what may be the world’s most conservative.  Woman are joining the workforce and music can be found in the streets.  Even in what may be the world’s most conservative country. The government has stripped the notorious religious police of their power and the more than 3,000 guardians of morality, who terrorized women for wearing makeup and arrested unmarried couples for walking next to each other on the street, are a rare sight these days.

But what does it mean that Saudi King, the guardian of the holy cities of Mecca and Medina, has reined in the feared moral police?  And why have the fundamentalists gone silent rather than lament the loss of values?

Is the fairy tale ending?…The primary reason is the disappearance of Saudi Arabia’s fairy-tale riches. The kingdom is experiencing the deepest crisis since oil first produced in 1938.  The current low prices have led to a 50% drop in revenue.  In 2015, the government budget deficit ballooned to 90 million euros, and the country’s borrowing began.

In conclusion…Saudi Arabia was the pillar in the Middle Eastern order that no longer exists.  This order was destroyed by the Arab Spring, and the wars in Iraq, Syria, and Yemen (neighboring states.)  Now, Iran and Saudi Arabia are fighting over power in the region.  These events are threatening stability in the kingdom.

Source: Susanne Koelbl, “Tasting Freedom.  Saudi Arabia Experiments with Reform Amid Economic Downturn,” Spiegel Online International, 17 May 2017

Saudi Arabia – A Kingdom In Retreat

SaudiKingdomKingdom Tower

The Kingdom is struggling with weak GDP growth, higher fees and taxes, and an economy that is unable to pay the dues to its workers, leaving thousands of workers from South Asia with an uncertain future.

When a nation is unable to provide food to its migrant workers, it says a lot about their financial condition.

The oil price crash has forced the oil-rich Kingdom to introduce austerity measures, and delay payments to already cash-strapped contractors.

“It looks like austerity has hit hard and more than we had anticipated, halting construction projects and stopping hiring,” said Jason Tuvey, Middle East economist at Capital Economics, reports the Financial Times.

Who is the Hardest Hit?…Construction laborers from India and Pakistan are most affected by the Kingdom’s hardships. This group of workers are left without a job, and without basic amenities such as insurance coverage, food, shelter and medical facilities—a situation that has improved after respective consulates stepped in to offer their own citizens aid.

Saudi’s Empty Pockets…Setting aside the Kingdom’s positive outlook, until the Saudi economy reduces its reliance on oil, the situation is likely to get worse before it gets any better. With oil prices reeling close to $42 a barrel, the Saudi economy is likely to run out of cash, according to the International Monetary Fund.

“All oil exporters will need to adjust to the new low oil price,” the IMF warned, reports the Independent. “All” in this case, includes, probably most importantly, Saudi Arabia.

Meanwhile, Saudi Arabia continues its record oil production, reaching 10.67 million barrels per day, up about 120,000 bpd on the prior month—with no signs of slowing. Although this will allow Saudi Arabia to hold onto its marketshare, which they can hardly be blamed for trying to cling to, it will no doubt add to the supply glut, and certainly will not bode well for oil prices in the short term.

In conclusion…And if oil prices continue to languish near today’s lows, it will be years before Saudi Arabia can regain its erstwhile glory.

 Source: Oil Price.com, Is Saudi Arabia About To Cry Uncle In the Oil Price War, By Rakesh Upadhyay – Aug 11, 2016