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September 23, 2015 at 07:20 AM
Although it’s the largest exporter of oil in the world and holds about 16% of proven oil reserves globally, the price of oil is proving more of a liability these days than the boon to the Saudi Arabia’s economy that it’s been in the past. Of course, Riyadh itself is partly responsible for that, having insisted that OPEC continue to produce oil at rates that almost ensure that the price of oil will continue to fall—at least until the back of the fracking market is broken. Or at least bent.
But that doesn’t mean that it’s relying solely on oil to fund its operations. It can’t, not at current prices, even if the whole “peak oil” theory were nonsense and the upsurge in interest in clean energy weren’t looking likely to finally bring it mainstream. Petroleum is responsible for about 80% of its budget revenues, accounts for 45% of GDP and 90% of export earnings. But at current prices, that’s put the country’s budget in the red; it needs oil to bring in more than $100/barrel to balance its budget, and it can’t keep financing operations forever by means of foreign asset drawdowns or loans. While those strategies will work for a while, if oil remains below $100/barrel, the country has to diversify.
It’s been working on that, although in addition to seeking to develop other sectors, it’s also encouraging efforts in the sectors of power generation, petrochemicals and exploration for natural gas—after all, one sector it knows well is energy. But it’s also looking at boosting telecommunications, information technology and transportation infrastructure.
