Welcome to AUSTERITY Saudi Arabia: Crashing oil prices sends economy into meltdown

[Daneshmand]

That will be a disaster.
Saudi Arabia's break-even price for oil production is a mere $15 a barrel, second-lowest only to Kuwait.
Now I had read that KSA had stashed a great deal of cash away during the most recent oil boom and currently holds foreign reserves equal to its GDP. And that it would survive adverse conditions. No idea about UAE though.

The Saudi breakeven price of oil is actually 106.50 dollars per barrel: https://www.foreignaffairs.com/articles/saudi-arabia/2015-12-03/beyond-break-even-prices

At this price, they will be able to balance their budget. As the articles quoting IMF say, Saudi cash reserves are running out too fast. At the rate, the reserves are being spent they will go bankrupt pretty soon. And since they have to other industry comparable to oil income, their only option to postpone the coming doomsday is to cut down spending and this will cause social discontent and instability, considering the fact that Saudis have to import everything from cars to food to maids to engineers to doctors to soldiers etc.

Their situation is pretty much dire. Already big international money is betting on Saudis to go bankrupt: http://money.cnn.com/2016/01/27/investing/saudi-arabia-stocks-oil-prices-ackman/

This is something you rarely see in international scene.

But UAE will survive since they have a smaller population and they have Dubai, which is a conduit for business in the region. In fact Dubai is very happy with sanctions removed on Iran since they will make huge amount of money by doing business with Iran.

But Saudi Arabia is sinking in quick-sand. And it is sinking fast.

when I don't find Persian prostitutes in Arab capitals anymore I will believe that Iran has benefitted...

Your personal attacks and foul mouth will not save Saudis. The Saudis dug their own grave. They are fighting a war and they are going bankrupt. This is the reality.

Meanwhile Iran is becoming more and more powerful. There are Russian, American, French, Pakistani and Japanese prostitutes too. And this means nothing.

You have failed to put forward logical argument. All you can come up with, is just such drivel. This goes to show your level of irrationality. Nothing more.

This is the problem with your kind. That you bunch are illogical. A hallmark of Takfirism.

 

[somebozo]

But Saudi Arabia is sinking in quick-sand. And it is sinking fast.

A hallmark of Takfirism.

So how many forigen workers in Iran vs Saudi?
Billions of Riyals are remitted by foreign workers in Saudi..

 

[mpk1988]

While I wouldn't predict doomsday for Saudi, I will say that, Iran is going to see a huge boom. A good chunk of the foreign workers going to Saudi will start going to Iran in the coming years. Let's not even get started about Iran's location. They will become the conduit to central Asia. Once China's silk route is established and India helps develop Chabbar we are looking at the biggest trade partners ever for Iran..

I don't even want to get started on the quiet social movements that will start and its impacts like the return of some of Iran's highly skilled and educated Diaspora.

All is not doom for Saudi though. They do need a lot of change however. They need population control, tax increase, reduction of subsidies and most of all social change.. They will not be able to afford wars and funding for global political and social clout though.

Also whoever said that the dollar is pegged to the oil needs to take economics 101. People have been predicting a dollar crash for decades now. With the recent changes, the confidence in dollar has only grown.

 

[somebozo]

While I wouldn't predict doomsday for Saudi, I will say that, Iran is going to see a huge boom. A good chunk of the foreign workers going to Saudi will start going to Iran in the coming years. Let's not even get started about Iran's location. They will become the conduit to central Asia. Once China's silk route is established and India helps develop Chabbar we are looking at the biggest trade partners ever for Iran..

I don't even want to get started on the quiet social movements that will start and its impacts like the return of some of Iran's highly skilled and educated Diaspora.

All is not doom for Saudi though. They do need a lot of change however. They need population control, tax increase, reduction of subsidies and most of all social change.. They will not be able to afford wars and funding for global political and social clout though.

Also whoever said that the dollar is pegged to the oil needs to take economics 101. People have been predicting a dollar crash for decades now. With the recent changes, the confidence in dollar has only grown.

Foolish dreams as Iran itself is struggling to put its population to work...beside Iran does not have a forigen worker policy like Saudi..third..wages in iran are Cr@p.....

 

[rashid.sarwar]

How does iran survived with all the sanctions and continued a battle in syria while saudia will go bankrupt, something I don't understand...

 

[hunter_hunted]

Saudis will be bailed out by their American messiahs. But I sense a civil war in the offing.

What you are sensing is the hunger, go get something to eat ....

 

[Brahmaputra Mail]

What you are sensing is the hunger, go get something to eat ....

Thanks, but I'm full.

 

[somebozo]

How does iran survived with all the sanctions and continued a battle in syria while saudia will go bankrupt, something I don't understand...

You will soon understand that Iranians have no logic...when it comes to political blabbering...

 

[NABZ]

@somebozo

you are refereeing to an article which is roughly 10 months old. prices has drastically dropped in the 4rth quarter, drilling activity is stalled in Saudi. what they are doing is they are increasing production with well interventions. how could you say that activity is booming when there are no new contracts for servicing and drilling companies?

 

[RoadRunner401]

.Saudi production cost is only like $3-4 USD and they can make a survival even at $10 by pumping more oil..

Wow Mr, Bozo you are pulling numbers out of your magic hat.

As a Customer, I am happy to see these prices, after a fill up, it leaves some extra cash in my pocket and that's OK by me and 1000s of other drivers around the world.

 

[NABZ]

Wow Mr, Bozo you are pulling numbers out of your magic hat.

View attachment 291153







As a Customer, I am happy to see these prices, after a fill up, it leaves some extra cash in my pocket and that's OK by me and 1000s of other drivers around the world.

trust me, Saudi can sustain upto 18$ a bbl

 

[RoadRunner401]

trust me, Saudi can sustain upto 18$ a bbl

I personally don't care, if they can or can't, but the numbers don't lie.


Oil prices plunged in the back half of 2014 after trading above $100 a barrel. The drop came after OPEC -- a group of some of the biggest oil producing nations in the world -- decided to continue pumping the same amount of oil despite clear signs that there was too much supply in the market.

Analysts say the OPEC move, which was led by Saudi Arabia, was designed to squeeze high-cost producers out of the market so they could reclaim market share.

"Vigorous production" from OPEC countries has created a "massive cushion" of 3 billion barrels of oil around the world, the International Energy Agency said in a recent statement.

The resulting crash in oil prices is pinching even the strongest OPEC members.

The International Monetary Fund warned last month that most countries in the Middle East -- including Saudi Arabia, Oman and Bahrain --- will run out of cash with in five years, if oil prices don't rise above roughly $50 per barrel.

"Oil exporters will need to adjust their spending and revenue policies to ensure fiscal sustainability," the IMF wrote.

 

[NABZ]

I agree.

The only solution to this problem is if America chooses to cut it's shale oil/gas production in N.Dakota.

 

[Tshering22]

Mate, Food supply is a very serious issue. India is currently self sufficient wrt food to large extent. But as the population increases that will be very much challenged. Even now occasionally there is spike in prices of food items like pulses or essentials like vegetables that sends shivers down the govt & politicians.

Any disruption in food supply to masses has only one definite outcome , La Revolución.

Our case is different as we are acquiring massive land facilities in Africa to ensure food security. Saudi is also doing it but it was doing so till now on the basis of its vast wealth and oil riches. However that is going to change soon.

Welcome to AUSTERITY Saudi Arabia: Crashing oil prices sends economy into meltdown

SAUDI Arabia faces financial ruin if it fails to undergo severe austerity measures in the coming years, as the oil price crash continues to rage, according to the International Monetary Fund (IMF).

Saudia Arabia faces financial troubles in the coming years

The Saudi royal family may have to cut back on its luxury lifestyle, while workers may not be able to reap the benefits of low rates, if the country wants to have any sort of economic future.

The kingdom will have to raise taxes, slash resident perks and cut lavish spending to offset plunging oil profits, the fund has forecast.

The Arab country is the globe's largest crude oil producer in the world and heavily dependent upon the commodity after reaping in recent decades.

Oil riches have allowed the Saudi royal family to enjoy one of the most decadent lifestyles in the world, alongside paying for generous subsidies and low taxes for citizens.

But that is now set to change.

Over the past 18 months the price of oil has plunged by more than two thirds - seriously denting Saudi Arabia's income.

Some analysts have said prices could fall as low as $10 a barrel from more than $100 in June 2014.

At the end of last year, the kingdom unveiled its largest ever deficit and warned the population of raised taxes.

But the kingdom could have to go further and completely transform its economy to survive, according to Masood Ahmed, head of the Middle East department.

He said: "This will have to be part of a multi-year adjustment process.

"There will have to be a major transformation of the Saudi economy. It is necessary, and it is going to be difficult, but it is a challenge which I think the authorities have clearly laid out.”

The IMF thinks Riyadh will have to cut its generous electricity, water and oil subsidies for citizens.

Saudi Arabia's wealth is nealry all from oil

Mr Ahmed added: "Energy price reform is key. It has been part of the social contract but that will now need to change.”

Falling oil prices are pushing countries around the world into crisis.

The IMF and World Bank is set to bail out Azerbaijan, which relies on oil and gas for around 95 per cent of exports.

Nigeria has also reportedly asked for a loan.

And the fund is worried about Brazil and Venezuela's financial security.

At the same time, oil and gas firms are being force to cut jobs and make huge savings.

Analysts have predicted BP is set to announce a huge 70 per cent drop in profits tomorrow, after already axing thousands of jobs.

Worries are also gathering pace around America's shale industry, where companies built up large levels of debt in recent years to invest in production.

This is the best news you have told till now.

The consequences of their past actions will come and stand in front of them.

 

[RoadRunner401]

I agree.

The only solution to this problem is if America chooses to cut it's shale oil/gas production in N.Dakota.

All oil and gas production in the United States, is controlled by private companies and I am sure, if they are not profitable they will be shut or idled.