• April 1st, 2016

Bio politics of Saudi Arabia Oil

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The world has learned that sudden surges in the price of oil cause economic havoc. When oil prices are low, the world economies promote low growth rates. Over the last two years, oil prices have dropped significantly from well over a $100 a barrel to below $30 a barrel. Consumers have gained from the lower oil prices, but producers have suffered deep losses. The lower prices in oil are spilling into financial markets, depressing consumer confidence in the economy. And, many states have slashed their budgets to deal with these lowered deficits in their GDP due to low oil revenues. Oil prices play a huge roll in stabilizing emerging markets that depend on oil, with oil prices plummeting so fast, it could cause budgetary concerns for many of these states.
The world is submerged in oil. OPEC states, are pumping at full force and Iran has just emerged from behind an embargo, flooding the market with even more oil. Saudi Arabia wants to eliminate higher cost producers, like fracking in the USA, out of the oil industry. Saudi Arabia can operate their oil industry at a very low production cost and keep oil prices low for a very long time, waiting on those oil industries with higher operating costs to leave the market. Iran adding additional oil to the market may cause some pain for Saudi Arabia in the near future, possibly lowering the prices even more. But, Saudi Arabia receives almost all of its government revenues from oil, as the world economy is flooded in oil, dropping the price, it drastically effected the government’s ability to sustain their current economic system. Saudi Arabia needs to reform its public policies and stabilize the price of oil in order to survive.

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