Oil 1 Peak Oil 21
SAUDI ECONOMY O/W US ECONOMY
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SAUDI ECONOMY O/W US ECONOMYSAUDI ECONOMY OUTWEIGHS US ECONOMY- MORE COUNTRIES DEPEND ON SAUDI OIL Howard Handy. Chief Economist & General Manager of Samba The Saudi Economy: Recent Performance and Prospects for 2008-09 April 2008 http://www.saudi-us-relations.org/articles/2008/ioi/080410-samba-economy.html The Global Context Saudi Arabia commands a pivotal position in the global economy. As both the world’s largest oil producer, and the only one with significant spare capacity, the Kingdom has a substantial influence on the supply (and hence price) of this most crucial resource. In addition, Saudi Arabia is an important exporter of capital. Although an increasing amount of the country's oil earnings are invested at home, such is the scale of these earnings that the country has continued to accumulate foreign assets. In 2007, the Saudi Arabian Monetary Authority (SAMA, the central bank) increased its foreign assets by $80 billion. Most of this is likely to have been channeled into US dollar-denominated assets, representing significant support for the greenback at a time when the US external current account remains in large deficit and there are growing uncertainties about US economic prospects. (We will explore Saudi Arabia's role in global financial intermediation in more detail in a later report.) Finally, the Kingdom's economy has been growing rapidly in recent years, doubling in nominal terms since 2002. With nominal GDP projected at around $465 billion this year, Saudi Arabia's economy is now on a par with that of Switzerland. It accounts for a little more that half of the total output of the GCC and is twice the size of the second largest GCC economy, the UAE. It is a major trading nation, and the second largest global source of outward remittances after the US. Oil prices, food prices, and US interest rates all have an important bearing on Saudi Arabia’s economy.. HIGH PRICES K2 ECONSAUDI ARABIA IS AN OIL BASED ECONOMY Bureau of Near Eastern Affairs, February 2008 “Background Note: Saudi Arabia” http://www.state.gov/r/pa/ei/bgn/3584.htm ECONOMY Oil was discovered in Saudi Arabia by U.S. geologists in the 1930s, although large scale production did not begin until after World War II. Oil wealth has made possible rapid economic development, which began in earnest in the 1960s and accelerated spectacularly in the 1970s, transforming the kingdom. Saudi oil reserves are the largest in the world, and Saudi Arabia is the world's leading oil producer and exporter. Oil accounts for more than 90% of the country's exports and nearly 75% of government revenues. Proven reserves are estimated to be 263 billion barrels, about one-quarter of world oil reserves. More than 95% of all Saudi oil is produced on behalf of the Saudi Government by the parastatal giant Saudi ARAMCO. In June 1993, Saudi ARAMCO absorbed the state marketing and refining company (SAMAREC), becoming the world's largest fully integrated oil company. Most Saudi oil exports move by tanker from Gulf terminals at Ras Tanura and Ju'aymah. The remaining oil exports are transported via the east-west pipeline across the kingdom to the Red Sea port of Yanbu. SAUDI ARABIA’S ECONOMY IS DIRECTLY TIED TO THE OIL MARKET- EPIRICALLY PROVEN Bureau of Near Eastern Affairs, February 2008 “Background Note: Saudi Arabia” http://www.state.gov/r/pa/ei/bgn/3584.htm Due to a sharp rise in petroleum revenues in 1974 following the 1973 Arab-Israeli war, Saudi Arabia became one of the fastest-growing economies in the world. It enjoyed a substantial surplus in its overall trade with other countries; imports increased rapidly; and ample government revenues were available for development, defense, and aid to other Arab and Islamic countries. But higher oil prices led to development of more oil fields around the world and reduced global consumption. The result, beginning in the mid-1980s, was a worldwide oil glut, which introduced an element of planning uncertainty for the first time in a decade. Saudi oil production, which had increased to almost 10 million barrels per day (b/d) during 1980-81, dropped to about 2 million b/d in 1985. Budgetary deficits developed, and the government drew down its foreign assets. Responding to financial pressures, Saudi Arabia gave up its role as the "swing producer" within OPEC in the summer of 1985 and accepted a production quota. Since then, Saudi oil policy has been guided by a desire to maintain market and quota shares and to support stability in the international oil market. Saudi Arabia was a key player in coordinating the successful 1999 campaign of OPEC and other oil-producing countries to raise the price of oil to its highest level since the Gulf War by managing production and supply of petroleum. That same year, Saudi Arabia established the Supreme Economic Council to formulate and better coordinate economic development policies in order to accelerate institutional and industrial reform. In response to increasing international demand for oil, Saudi ARAMCO is engaged in an expansion of its oil production capacity, and plans to raise its capacity from the current 11 million barrels/day (mb/d) to 12 mb/d by 2009. Saudi ARAMCO is also increasing production of associated and non-associated natural gas to feed the expanding petrochemical sector. OIL STRONG NOWOIL INDUSTRY STRONG NOW Bureau of Near Eastern Affairs, February 2008 “Background Note: Saudi Arabia” http://www.state.gov/r/pa/ei/bgn/3584.htm Notably, Saudi Arabia has awarded contracts to foreign companies to conduct gas exploration in selected regions of the country—the first such foreign participation in the petroleum sector upstream since the nationalization of ARAMCO in the 1970s. Saudi Arabia continues to pursue rapid industrial expansion, led by the petrochemical sector. The Saudi Basic Industries Corporation (SABIC), a parastatal petrochemical company, is now one of the world’s leading petrochemical producers, and the government promotes private sector involvement in petrochemicals. SAUDI ECON STRONG NOW-- OIL REVENUES AND INVESTMENTS Kuwait Times, 2/13/08 “Saudi economy thrives after structural reform” http://www.kuwaittimes.net/read_news.php?newsid=MzE3NzU4Njg= Oil has a major share in the country's revenue. Government officials have set a vision for the year 2025 where the economy will be a diversified, private-sector driven, providing rewarding job opportunities, quality education, health care facilities and necessary skills to ensure positive growth momentum. The Kingdom is focusing on development of an attractive investment environment. In the past years corporate tax on foreign-owned firms was reduced from 45 percent to 20 percent which has aided in foreign direct investment inflows to increase from $183 million in 2000 to $18,293 million in 2006. PRICES HIGH NOW. NO RISK OF LOWERING Brad Bourland, Chief Economist & Head of Research Jadwa Investment, “Impact of the Weak Global Economy” 4/3/08 http://www.saudi-us-relations.org/articles/2008/ioi/080403-bourland-economy.html Oil prices are likely to remain high despite our projection of an extended period of slower global economic growth because new additions to supply capacity are likely to be limited. Shortages of skilled manpower and technology and rising costs have delayed some projects resulting in the regular downgrading of projections of new capacity coming on stream, especially outside of Opec. The International Energy Agency expects total non-Opec supply to grow by 2.5 million barrels per day over the years 2008-2010, little more than half the expected increase in demand over the same period. HIGH PRICES K2 ECONREFORMS FUNDED BY HIGH OIL PRICES ENSURE STRONG SAUDI ECONOMY NOW Kuwait Times, 2/13/08 “Saudi economy thrives after structural reform” http://www.kuwaittimes.net/read_news.php?newsid=MzE3NzU4Njg= Benefiting from the economic and structural reforms along with high oil prices, the strong economic performance will likely continue, giving a promising outlook for the Saudi economy in the years to come. The economy is expected to benefit from the economic diversification and more attractive investment environment. Commitment to privatization and creating an environment that is even more attractive to private investment, stronger growth in private sector and more inflow of foreign direct investment are expected. This will be helped by the strong growth in industrial sector, electricity and water, petrochemicals and other downstream industries, and the energy-intensive mining sector. SAUDI ECONOMY DEPENDENT ON OIL Library of Congress – Federal Research Division Country Profile: Saudi Arabia, September 2006 http://www.stat-usa.gov/miscfiles.nsf/vwNoteIDLookup/NT000F8F26/$File/SAUDI_ARABIA.PDF?OpenElement Overview: Saudi Arabia has a robust economy that experienced rapid growth from 2003 to 2005 but remains largely dependent on the production and exportation of oil. Saudi Arabia produces more oil and natural gas liquids than any other country in the world. The Saudi Arabia Oil Company (Saudi Aramco), which was fully nationalized in 1988, controls this vitally important resource. Even as the demand for oil, and consequently the price per barrel, remain at historic highs, Saudi Arabia faces the challenge of diversifying its economy. In 1999 a royal decree established the Supreme Economic Council under the leadership of the crown price and charged it with bringing Saudi Arabia’s economy into the twenty-first century. Since the 1970s, the Saudi government has used five-year development plans to try to make its economy less susceptible to fluctuations in oil prices. Currently in its eighth five-year plan (2005–8), the government has goals of achieving modest but consistent gross domestic product (GDP) growth, increasing the role of the private sector in the economy, and creating significant numbers of new jobs for Saudi citizens. Despite ambitious government plans for economic modernization and diversification, the development of the non-oil economy has proceeded slowly, and attempts in the past decade to encourage private investment have been hampered by the many vested interests of the royal family, which continues to dominate the economy. Strong oil sales have boosted government revenues and enabled robust government spending (a trend expected to continue in the near term), but analysts note a long-term decline in national living standards. Compared to some other oil-dominant economies, such as the United Arab Emirates and Kuwait, Saudi Arabia has a relatively low per capita GDP. Popular discontent has been rising for years among Saudi citizens who feel that not enough of the country’s oil wealth goes back to the people. Although production has boomed, there is actually less oil money to go around. Saudi Arabia’s per capita oil export revenue in 2004, US$4,500 per person, was far less than the high of nearly US$23,000 reached in 1980. Economic discontent will likely continue to reverberate as high levels of unemployment plague the country’s young male population. Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 9.54 Mb. Share with your friends:
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