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From what I understand? Saudi Arabia has plenty of money banked; They can survive a decade without the sort of windfall profits they've enjoyed. "SAMA's net f
by mapt 11y ago
From what I understand? Saudi Arabia has plenty of money banked; They can survive a decade without the sort of windfall profits they've enjoyed.
"SAMA's net foreign assets totaled $628 billion in November, down from a record high of $737 billion in August 2014,"
The marginal price to produce a barrel of Saudi crude is still the lowest in the world, at just three USD. What's going die out once the equipment is worn out (or require extensive subsidy) are marginal plays in developed countries like Canada, the US, and the North Sea, the Arctic, the deep offshore drilling, tight or heavy oil, tar sands, tar shales, smaller fields without economies of scale, and all forms of biodiesel & ethanol (yes, even the most efficient, Brazilian ethanol).
All the oil-dependent economies are going to suffer and compensate monetarily, by drawing down sovereign wealth or cutting expenditures, but the harder bound is the level at which it makes economic sense to stop drilling. Production prices in the above settings are high enough that they just can't make money at $30/barrel, which is a whole other category of problem than not making enough money to feed the government budget which has ballooned only in the last decade taking advantage of higher prices.
http://knoema.com/vyronoe/cost-of-oil-production-by-country http://knoema.com/vyronoe/cost-of-oil-production-by-country
- joezydeco 11y agoSaudi oil revenue has already sunk below government expenditures[1]. The just-announced 2016 budget has a deficit of $87 billion[2]. That's 7 years to go until the reserves are gone. And how much does the House of Saud hand out to its citizens to keep things calm and orderly? What happens when that money starts to dry up? [1] http://www.wsj.com/articles/new-saudi-budget-expected-to-be-squeezed-by-low-oil-prices-1450915313 http://www.wsj.com/articles/new-saudi-budget-expected-to-be-... [2] http://english.alarabiya.net/en/special-reports/saudi-budget-2016/2015/12/28/Saudi-Arabia-to-unveil-2016-budget.html http://english.alarabiya.net/en/special-reports/saudi-budget...
- mapt 11y agoThey bleed out savings while slowly ramping back down to the vicinity of the levels that they handed out 15 years ago. This is a traumatic process, sure - but it's not like they were uncomfortably poor 15 years ago, and they (unlike some others, I'm looking at you Venezuela) have plenty of buffer with which to keep their populations comfortable until a few years after their rivals stop drilling.
- moistgorilla 11y agoGoing from rich to poor is significantly harder than staying poor.
- mapt 11y agoAll they need to do is outlast maybe 20% of the rest of the oil producers, enough to raise prices back up.