Saudi Arabia Plans to Diversify Away from Crude and Could Operate on $40 Oil

Saudi Arabia still loses sleep over the price of oil. Not for much longer.

The kingdom says it is making good progress on a plan to break its oil dependency and won’t be bothered if the price drops to $40 a barrel by 2020.

“We will not really care much whether the price is 40, 45, 50, 55 at that time because we have gone significantly out of our way to be independent of the oil price,” Saudi finance minister Mohammed Al Jadaan told CNNMoney’s Emerging Markets Editor John Defterios.

“We are planning to totally [end] that dependency that we have been living for the last 40, 50 years. Hopefully by 2030, I wouldn’t care if the oil price is zero,” he said in an interview in Jeddah.

Saudi Arabia set out an ambitious plan last year to wean the economy off oil after prices dropped to $26 a barrel, blasting a huge hole in the country’s budget.

Since then, Saudi Arabia has stabilized its economy. It has cut government subsidies, announced new taxes and borrowed billions to balance its books.

It also cut wages for top ministers and public workers. That policy was reversed six months later, a move Al Jadaan said was designed to boost growth.

“It was done at a time [when] we were really worried about oil prices, worried about other stresses in the economy,” he said. “Now that we have seen how the plan is unfolding… maybe it’s time to inject more funding into the people’s hand.”
via CNN

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza