Saudi Arabia may go broke before the US oil industry buckles

[temujin]

Ambrose Evans-Pritchard is a paid shill for the fracking industry. He always writes sensationalist, attention-seeking articles that never come true. In fact, he even got kicked out of the White House for constant rumor-mongering and conspiracy theorizing.

Frankly, Saudi Arabia will be fine. Their liquid reserves/assets and hedge fund resources are simply too vast and can cushion them for an extremely long time while their rivals bleed.

Errr...AEP is the international business editor at the Telegraph and one of the saner economic commentators in the mainstream media IMO-he has however been very critical of the credit fuelled Chinese growth model of late, which could explain your antagonism towards him, but I would have expected a sensible poster like you to respond to the substantive points raised by AEP in his article rather than resort to ad hominens...

Calling for instituting taxation in Saudi Arabia is the same as calling for toppling monarchy. Since an unwritten constitution by which Saudi Arabia and other such petro-monarchies govern is the agreement between the public and the monarchy wherein there will be no taxation with full benefits for citizenry, while there will be no political representation and no dissent. It is a simple system. No tax for no vote system.

Any call for initiating taxation will result in calls for political representation and the end of monarchy. Since if people are forced to pay tax, they will automatically want to know where the money is going and how it is being spent and therefore the start of political dissent.



It was possible decades ago and not now. Decades ago, the population was very low, the people lived a simple life off their land mostly, and they did not need to have the world's third largest defense budget after United States and China.

Things have changed. Without oil money, Saudi Arabia will collapse. Already in 1990's they went through a hard time and had to borrow money. But now this is going to be even worse. But for the world is going to be good since less money for Saudi Arabia will mean safer and saner world as there will be less wahabi propaganda and financing of madrassahs and mosques promoting hatred and violence.

This...the day KSA introduces taxation of any sort or retrenchment of generous social spending which keeps its young, restive population quiet would mark the beginning of the end of the kingdom as we know it (which may not be such a bad thing for much of the ME, North/Horn of Africa and parts of South Asia facing the scourge of Wahabbist terror)

 

[Daneshmand]

This...the day KSA introduces taxation or any sort or retrenchment of generous social spending which keeps its young, restive population quiet would mark the beginning of the end of the kingdom as we know it (which may not be such a bad thing for much of the ME, North/Horn of Africa and parts of South Asia facing the scourge of Wahabbist terror)

True to the bone.

 

[temujin]

I agree, unless we find a new industrial boom like the one which caused prices to sky rocket, there will be a levelling of prices around the 55 per dollar mark. because there are many rigs which are not even feasible at rates below these, the demand is mainly being met by the OPEC and Russian etc flooding of markets while there is no demand.

China has slowed down its growth, India is not growing in the areas which are fuel extensive, Russia and Brazil are stagnating and actually their economies are going down in terms of oil use, while Europe is adding no real extra oil demand.

true, if they take advantage and build their economies taking advantage, not wasting it away like Pakistan is doing at the moment. 60 dollars to 46 dollars and we see a 4 rupee change of prices.

@Gufi whilst I agree with many of the reasons that you have cited for falling demand and prices recently, I do not believe the floor on prices is determined by the break even costs of shale producers-its mostly based on market sentiment and tight supply and bears little correlation to actual production costs since it costs very little to get the stuff out of the ground in places like Saudia (around $3-4 per barrel, IIRC) so it could go a lot lower than $50-55 (Brent is trading under $50 already).

The trouble for major oil producers like KSA is that they have become wholly dependent on perpetually high prices and have organised their economies accordingly. What the shale phenomena will do is put a permanent ceiling on prices at a level where large scale shale exploitation becomes viable once again. Whilst countries like Norway and Qatar that have reinvested their surpluses wisely or successfully diversified their economies are likely to survive a prolonged slump in better shape, those like the Saudis, who need oil to be around $106 per barrel to sustain current levels of spending (and are burning up 12 bln/month of Forex reserves if AEP is to be believed) will not.

With 90% of state revenues derived from oil, an unskilled and semi literate indigenous workforce and economic 'diversification' limited to the occasional alfalfa farm out in the desert, I expect bad times ahead for Saudi (and conversly, good times for its neighbours, Iran and Saudi colonies in South Asia)

 

[OldenWisdom...قول بزرگ]

Saudis are right well at least at the concept level. However they must realize while their dollar comes from selling OIL, U.S. prints that dollar! and no need printing in modern day fractional banking.

 

[opruh]

I'm ok with Saudi collapsing, given how they treat their women their.

 

[VCheng]

Saudi borrowing goes up and oil prices come down.