Dear MEL Topic Readers,
The oil price, Iran and Saudi's economy
Budget crisis. As posted on the last day of the last year in Vol.1359,
the Gulf’s oil giant needs to cut its spending and subsidizing. It is because
of the sharp drop in revenues as oil prices have fallen more than 60 percent
since 2014. Since nearly 90 percent of government revenues come from oil, the
kingdom is struggling to battle in two major fronts.
One is how to manage the financial budget for the next few years as
price recovery isn’t expected in any foreseeable future. That is due to the
lower demand than production.
Another is to eliminate its competitors in oil production. Since Saudi
can produce oil at a lower price than most of its competitors, they remain as
price leader in the market even under $40 per barrel.
The question is how long they can live without an increase in revenues?
Enjoy reading and learning what’s going on in the Gulf region.
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