Saudi Arabia entering economic troubles as oil prices remain low. - Polidicks

[img]http://ichef-1.bbci.co.uk/news/660/cpsprodpb/14A8C/production/_87402648_gettyimages-102957081.jpg[/img] [i]Saudi Arabia's stock market has fallen sharply after it announced public spending cuts and rises in tax, fuel and energy prices in 2016.[/i] [quote]The country's main stock index fell 3% in the opening 15 minutes of trade with petrochemical firms worst hit.Saudi Basic Industries, the biggest petrochemical producer, tumbled 8.3% while Saudi Kayan lost 4.8%. [b]Saudi Arabia's budget deficit soared to $98bn (£65.7bn) this year on the back of falling crude prices. [/b] [b]In the first budget under King Salman, the kingdom said revenues reached 608bn riyals (£108.7bn; $162bn), down 15% on official expectations. Spending for the year hit 975bn riyals, some 13% more than forecast.[/b] To help make up the shortfall, the country's finance ministry said it would cut subsidies for fuel. Petrol prices could in some cases increase by as much as 50%, authorities said, although they will remain low by international standards. Diesel, electricity and water prices will also increase. King Salman said the budget came "in light of the decrease in oil prices, the economic and regional and international financial challenges - where global economic growth has declined from its previous level - and the lack of stability in some of the neighbouring states."[/quote] [url]http://www.bbc.co.uk/news/business-35188807[/url] The Saudis have long benefited from high oil prices which have subsidized their badly run country and ineffectual economy. With oil prices much lower now, they are hemorrhaging money, made worse by the fact that they have to increase spending on their military and on sinecures. It'll be interesting to see how this develops the longer oil prices remain this low.

cue regime change?

I would not be surprised if the fact that Oil prices nose-dived this year is part of some effort to fuck over ISIS. But frankly the Saudis had this coming, they've gotten around maturing as a country because they make so much Oil money until now so hopefully this winds up being good for them in the long run.

[QUOTE=TG2;49412725]cue regime change?[/QUOTE] highly doubt it

Oh shit, you mean basing 90% of your entire country's economy on a single commodity is a bad idea? Who knew! Sarcasm aside, we've known for a long time that having lots of oil won't save your country from poor governance and other inefficiencies. Venezuela is a screaming example of this.

[QUOTE=TG2;49412725]cue regime change?[/QUOTE] Any internal regime change will likely result in an anti-west, Iran-style theocracy.

[QUOTE=Daniel Smith;49412770]Any internal regime change will likely result in an anti-west, Iran-style theocracy.[/QUOTE] what's more likely is the collapse of the country itself into the quarreling tribes that lived there a century ago

Isn't the low oil price partly because of SA (and OPEC in general)? They haven't (iirc) cut production at all, basically because they want a low oil price to kill off the (otherwise) blooming shale industry.

[QUOTE=GoDong-DK;49412881]Isn't the low oil price partly because of SA (and OPEC in general)? They haven't (iirc) cut production at all, basically because they want a low oil price to kill off the (otherwise) blooming shale industry.[/QUOTE] you got it That's pretty much the tale. And Canada is also suffering it. Yay political power struggles!

Look's like it might not've been smart to invest in so many billion dollar developments, Saudi Arabia

[QUOTE=goon165;49412731]I would not be surprised if the fact that Oil prices nose-dived this year is part of some effort to fuck over ISIS. But frankly the Saudis had this coming, they've gotten around maturing as a country because they make so much Oil money until now so hopefully this winds up being good for them in the long run.[/QUOTE] Irc they did expect this hence their efforts to push for tourism etc for the future economy. But not this early + their medieval laws haven't helped at all.

Sadly the people people benefiting from income inequality can just bail out if the industry starts to crumble and invest their wealth into other industries elsewhere, and the ones to suffer are the local workers. I don't know all that much of Saudi Arabia's economy or society, but my impression is that they had a lot of potential in their natural resources to create an elevated nation, but the wealth ended up going to the people in charge. Comparatively when Finland started getting good profit from forestry, the government invested into social welfare and education, so that we can continue to thrive even if wood falls out of fashion.

[QUOTE=Talishmar;49412977]Sadly the people people benefiting from income inequality can just bail out if the industry starts to crumble and invest their wealth into other industries elsewhere, and the ones to suffer are the local workers. I don't know all that much of Saudi Arabia's economy or society, but my impression is that they had a lot of potential in their natural resources to create an elevated nation, but the wealth ended up going to the people in charge. Comparatively when Finland started getting good profit from forestry, the government invested into social welfare and education, so that we can continue to thrive even if wood falls out of fashion.[/QUOTE] Most of the people employed in Saudi Arabia are actually foreigners (about 90% of the private sector are foreigners), with most Arabs who are actually in work (about a third of them are) are almost all employed by the government largely to keep them busy more than anything else. Education in the country is atrocious despite massive investments into it (Saudi Arabia has virtually no innovation, invention, science industry, or manufacturing), the vast majority of the population live on benefits (virtually everything is heavily subsidized), and most people in the country deem work to be beneath them. There is pretty much no future for Saudi Arabia (even as a unified country) once they run out of oil money, and quite possibly long before that.

[QUOTE=Sobotnik;49413063]Most of the people employed in Saudi Arabia are actually foreigners (about 90% of the private sector are foreigners), with most Arabs who are actually in work (about a third of them are) are almost all employed by the government largely to keep them busy more than anything else. Education in the country is atrocious despite massive investments into it (Saudi Arabia has virtually no innovation, invention, science industry, or manufacturing), the vast majority of the population live on benefits (virtually everything is heavily subsidized), and most people in the country deem work to be beneath them. There is pretty much no future for Saudi Arabia (even as a unified country) once they run out of oil money, and quite possibly long before that.[/QUOTE] Interesting. Is this model repeated in other oil rich states in the region?

I saw gas at $1.85 a gallon yesterday. Still happy about that in the face of this news. Sorry Saudi Arabia but I'm not willing to spend $4 a gallon so you can sustain an outmoded government and economic model.

Burn in hell you pieces of shit. But really, all they are are just a bunch of ISIS-ish tribes banding together in order to stone more gays and women. This alone should be enough for people to stop using fossil fuels, even if they don't believe in environmentalism.

[QUOTE=FlashMarsh;49413311]Interesting. Is this model repeated in other oil rich states in the region?[/QUOTE]No, other states in the region just have poor people trying to get by that the cops kick out of the rich areas where Westerners are. Saudi Arabia is large enough and powerful enough to have these big policies aimed squarely at artificially supporting their country. Plus there's always the religious aspect, a lot of things are handled by religious institutions because they're the stewards of Mecca, a lot of their more advanced transportation projects that connect Mecca and Riyadh got a huge, huge chunk of funding from religious sources. Other states in the region don't have that to keep them afloat, they rely heavily on other industries which directly employs their population. [editline]29th December 2015[/editline] This really isn't entirely a good thing by the way, part of the reason why people turn to religious extremism is the fucking ridiculous economic disparity in the Middle East and a complete lack of socioeconomic opportunities. This will thoroughly fuck a lot of people over and quite likely drive a large number of them into the waiting arms of terrorist groups worldwide.

[QUOTE=FlashMarsh;49413311]Interesting. Is this model repeated in other oil rich states in the region?[/QUOTE] Pretty much. they all are chronically dependent on virtually a single product or service to keep their mismanaged command economies functioning. despite what some of the more idealistic would have you believe, Dubai has virtually the same economic model. given that it's one of the most disgusting cities in the world it won't surprise anybody when it finally collapses in a few decades all of the oil-rich arab states subsist by importing foreign workers to work their oil fields and to build/maintain infrastructure. they all suffer from chronic shortages of water and food (both of which are solved with oil or capital reserves), and unlike more successful countries they don't have the educational system, civil society, or competence that makes diversifying their economies into long-term sustainable models possible. you can already tell arabia is in trouble because per-capita wealth has been declining in saudi arabia since the 1980s

[QUOTE=Sobotnik;49413600]Pretty much. they all are chronically dependent on virtually a single product or service to keep their mismanaged command economies functioning. despite what some of the more idealistic would have you believe, Dubai has virtually the same economic model. given that it's one of the most disgusting cities in the world it won't surprise anybody when it finally collapses in a few decades all of the oil-rich arab states subsist by importing foreign workers to work their oil fields and to build/maintain infrastructure. they all suffer from chronic shortages of water and food (both of which are solved with oil or capital reserves), and unlike more successful countries they don't have the educational system, civil society, or competence that makes diversifying their economies into long-term sustainable models possible. you can already tell arabia is in trouble because per-capita wealth has been declining in saudi arabia since the 1980s[/QUOTE]I disagree, the actual employment of locals isn't a thing during the construction phase of all those fancy high-rises but they absolutely are employed once it's built. There's just no economic incentive to import workers into a hotel or resort when there's a pool of them right there in the city. Construction is different, the companies import Bangladeshi workers because they're cheap and they can get away with basically anything; Dubai is literally built on slave labor. There's also other countries that have a powerful fishing and agricultural industries that have been increasingly under threat and as such they're also the countries with ongoing civil unrest. Yemen has, what, 20% of it's GDP in agriculture alone? Meanwhile Yemen has next to no oil and their manufacturing industry is mostly geared toward supporting that industry in other countries, such as neighboring Saudi Arabia. That economic model you're talking about doesn't exist in these smaller countries, they cannot float their economy like the Saudis do and they're suffering from a number of social problems as a result. Actually if you want to see what Saudi Arabia will look like as things go to shit avert your gaze slightly to the south, you'll see what's in store for them. [editline]29th December 2015[/editline] Unless you were talking about Syria or Iraq for some reason, and historically both countries have put a great emphasis on using their oil profits to improve their educated workforce. They're both (or at least one still is) based off of Ba'athist ideals that directly conflict with how the Saudis do things. Other than them there really isn't that many other super oil-rich countries besides Iran and, of course, they're something entirely different.

Wouldn't Saudi Arabia be able to get out of this by taking loans from other countries to sustain them for a while, and then reducing how much oil they're pumping to raise prices? Not saying I'd want that to happen, just saying thats a way they could probably get out of this situation.

I wonder what will happen to countries like saudi arabia when the society outgrows the need for oil based commodities.

[QUOTE=JumpinJackFlash;49413773]I disagree, the actual employment of locals isn't a thing during the construction phase of all those fancy high-rises but they absolutely are employed once it's built.[/quote] Virtually of the administrative and technical jobs in Saudi Arabia (the important ones which aren't sinecures anyways) are staffed almost entirely by imported foreigners. Most Saudis are lazy and consider working to be beneath them, which is why barely a third of them are actually in work or are even actively looking for employment. [quote]That economic model you're talking about doesn't exist in these smaller countries, they cannot float their economy like the Saudis do and they're suffering from a number of social problems as a result.[/quote] I'm talking more about places like Dubai and the United Arab Emirates, Qatar, Kuwait, etc or which have similar problems and will enter a similar crisis once their economies inevitably collapse. [QUOTE=DiBBs27;49413890]I wonder what will happen to countries like saudi arabia when the society outgrows the need for oil based commodities.[/QUOTE] it'll return to the sands whence it came

[QUOTE=fruxodaily;49412732]highly doubt it[/QUOTE] I'm of the belief that the Saud family head keeps a leash on the more radical elements of the country. Regime change cannot be a good thing.

[QUOTE=Headhumpy;49412754]Oh shit, you mean basing 90% of your entire country's economy on a single commodity is a bad idea? Who knew![/QUOTE] [img]https://i.imgur.com/6CTEpYZ.gif[/img]

[QUOTE=Rangergxi;49413939]I'm of the belief that the Saud family head keeps a leash on the more radical elements of the country. Regime change cannot be a good thing.[/QUOTE] That's not really true. The royals and the religious authorities hold the country in a weird and precarious balance.

[QUOTE=Sobotnik;49413896]Virtually of the administrative and technical jobs in Saudi Arabia (the important ones which aren't sinecures anyways) are staffed almost entirely by imported foreigners. Most Saudis are lazy and consider working to be beneath them, which is why barely a third of them are actually in work or are even actively looking for employment. I'm talking more about places like Dubai and the United Arab Emirates, Qatar, Kuwait, etc or which have similar problems and will enter a similar crisis once their economies inevitably collapse.[/QUOTE]Well Kuwait doesn't really have anything besides oil and they're not chronically unemployed or anything like that. Kuwait actually has one of the highest education rates in the region, but it still falls behind a lot of other countries. Meanwhile the UAE is, well, it has an extremely diverse economy and while the bulk of it's GDP comes from the petroleum industry it's by no means entirely reliant on it. They're trying to be the financial center of the Middle East, and also there's a rapidly growing ship repair and construction industry, and finally there's their tourism industry that they've been cultivating for decades. Will this offset their reliance on oil in a few years? Probably not. Do they see the writing on the wall? Yeah, I'd say so, they're showing all the signs of trying to reduce their reliance on a dying industry. As for the other nations that suffer from Saudi Arabia's business model, well, they're definitely going to implode far sooner than later and if you look closely you can see the beginning of unrest in Qatar. This is really, really significant because Qatar is and has historically been [I]very[/I] stable and they're more or less scrambling to diversify their economy at this point. Both Doha and Umm Said have seen very respectable growth, and they have had a specific program to drastically increase the amount of people employed (while their population is booming and has been for decades) so they're also well aware of what's to come. I'm sure the plan to make Doha the financial heart of Arabia is probably going to conflict with Dubai's growing financial sector, so that'll be an interesting show in the coming decades. Also I should mention Qatar's always been deeply connected to the sea and they do have a ship building industry that they could try to cultivate and grow even further. Plus there will likely be no shortage of LPG demand in the coming decades, especially since certain people are flirting with using straight-up LPG/LOX for rocket motors. If that takes off any country that has access to LPG reserves will basically be set for however long they last, even if everyone else stops using gasoline and diesel.

Gas is 1.59 a gallon here in missouri

[QUOTE=JumpinJackFlash;49414064]Well Kuwait doesn't really have anything besides oil and they're not chronically unemployed or anything like that. Meanwhile the UAE is, well, it has an extremely diverse economy and while the bulk of it's GDP comes from the petroleum industry it's by no means entirely reliant on it.[/quote] Both are extremely dependent upon oil. Kuwait hasn't diversified their economy at all (it's gotten worse over time). Dubai had to get bailed out by its oil rich neighbours in 2008, and the vast bulk of government revenue and exports is composed of oil. The "diverse" aspects of their economies are superfluous at best, relying indirectly on oil and whatever capital they have in reserve. It's all either based on development and infrastructure growth (both of which have rapidly diminishing returns), or on providing services to population of losers who couldn't make it in the west and moved to Dubai to manage the kleptocratic economy. Dubai is still chronically dependent on oil (or what they have in reserves as a result of it) both directly and indirectly. [quote]They're trying to be the financial center of the Middle East, and also there's a rapidly growing ship repair and construction industry, and finally there's their tourism industry that they've been cultivating for decades. Will this offset their reliance on oil in a few years? Probably not. Do they see the writing on the wall? Yeah, I'd say so, they're showing all the signs of trying to reduce their reliance on a dying industry.[/quote] The problem is that they can't. Most of these countries are little more than autocracies run by inbreds that siphon off public finances. Their native populations are indolent, prone to aggression, coddled by extensive state social services/subsidies that prevented the arab spring spreading there, without skills, often unemployed, and poorly educated. Nepotism and corruption are both commonplace and are not just accepted, but actively encouraged. Looking at tourism for instance, Dubai is built in one of the most inhospitable places on the planet (made worse by the encroach of global warming). It has to import virtually all food and desalinate all water at great expense, while the repressive social/political atmosphere and the haphazard way in which the city has been built works against it (it has no proper sanitation network and raw sewage is dumped into the sea). These countries largely survive on a mixture of luck, reserves, and goodwill, all of which are running out.

Unsuprising, because of their attempt to kill off US shale. IMF expects Saudi backruptcy in as little as 5 years. [url]http://www.imf.org/external/pubs/ft/reo/2015/mcd/eng/mreo1015.htm[/url] [QUOTE]The large and sustained drop in oil prices has increased fiscal vulnerabilities in MENA and CCA oil-exporting countries. The issue of fiscal space has become critical as oil exporters decide how quickly to adjust their fiscal policies to the new reality of persistently lower oil prices. This box considers several alternative measures of fiscal space. A good starting point is the size of governments’ financial assets—commonly referred to as “fiscal buffers.” In general, countries with larger buffers can afford to maintain fiscal deficits further into the future, so as to reduce the impact of lower oil prices on growth. On current trends, however, all non-GCC MENA oil exporters are already projected to run out of liquid financial assets in the next three years (see Chapter 1). In, contrast, CCA oil exporters have at least 15 years’ worth of available financial savings,1 while GCC countries are split evenly between countries with relatively large buffers (Kuwait, Qatar, and the United Arab Emirates—more than 20 years remaining) [B]and countries with relatively smaller buffers (Bahrain, Oman, and Saudi Arabia—less than five years).[/B] [/QUOTE] They're hemorrhaging so much money right now and running a proxy war in Yemeni isn't helping.

[QUOTE=GoDong-DK;49412881]Isn't the low oil price partly because of SA (and OPEC in general)? They haven't (iirc) cut production at all, basically because they want a low oil price to kill off the (otherwise) blooming shale industry.[/QUOTE] Meanwhile shale production is growing anyway because the biggest buyer is the US and we lead in production.