- write a conclusion about this report :
The largest producer and exporter of oil to the world is Saudi Arabia, and has a large reserve of the world estimated by one quarter of the oil – more than 260 billion barrels. Most are located in the Eastern side , in Arabian gulf there are a lot of oil fields such as a largest onshore oilfield in Ghawar and the largest offshore oilfield at Safaniya.
Saudi refineries produce almost 8 million barrels of oil per day, and they plan to increase production to around 12 million barrels per day.
Saudi Arabia plays a unique role in the global energy industry because it is the largest exporter and producer of oil around the world . The policies on the production and export of oil, natural gas and petroleum products have a major affect the energy market, as well as the global economy. Mindful of this responsibility, Saudi Arabia is committed to the balance of supplies and prices.
In those days, the Saudi Arabia play a large and important role in crisis – such as the Gulf Crisis of 1990-91, also in Iraq war it effects on oil market – and covered any drop in oil supplies by increasing its output. In the meantime, Saudi Arabia has prevented the shocks including loss of supplies and increase in prices. In 1980s the Saudi Arabia entered ARAMCO –Saudi oil company- and the government assumed ownership of the company and they renamed Saudi ARAMCO.
Importance to Saudi Arabia economy
Saudi Arabia is fully committed to the increased participation of the private sector in economic growth, because privatization is an essential element in the economic liberalization, where it is opening a wide range of sectors such as telecommunications, electricity, airlines, postal services, cities and industrial services, port facilities, water and some of the potential areas Investment, in front of all of the private sector.
The kingdom plans to invest $ 200 billion in oil, gas, electricity and water desalination and petrochemical fields, and the international oil companies take into account the investment of $ 100 billion over a period of time is estimated at 20 years in the field of natural gas production.
It is also expected to be local investment capital of $ 6 billion in the tourism sector. Saudi Arabia is considered one of the founding members of the arbitration agreement, a WTO member. In many other international and regional organizations.
The Saudi economy depends mostly on oil and oil products. Saudi Arabia exports the largest amount of oil compare to the whole world. Oil been always having its ups and downs but lately oil reach the lowest point in many decade, between 2014-2016 Saudi made strategic plans and challenges to make the economy a little bit more independent from oil. There are many issues facing the case of a change in the government of the Kingdom , as a reflection of this change on oil prices and the budget deficit in addition to the effect of the change on unemployment, education and health care issues , and the extent of diversification of the economy and meet the oil production in the developed world.
Saudi Arabia’s challenges in the Global Oil Market . The first challenge ,the adoption of the Saudi economy on oil and gas , accounting for around 44 % of GDP , than those imposed by the trend toward rapid economic diversification of income sources.
The second challenge , a sharp decline in oil prices by about 60% , given that oil revenues represent more than 90% of the Saudi budget revenues , for being the largest oil exporter in the world, at a rate of 8 million barrels per day , with a maximum output capacity to 12.5 million barrels per day .
policy options to overcome them :
20300 vision will be the right solution to overcome these problems because of moving the economy beyond oil . 2030 vision includes :
•having economic diversification ,by improving and supporting the domestic industries . also , having perfect workforce participation by Saudi women and man is the basic of achieving household income and having a Faster productivity growth needs better business regulation and increases of openness to competition and investment .
•Aramco in the stock market : less than 5% of Aramco will be in the stock market , so this will increase the investment .
•Green card : by having the green card non Saudis will have the ability to live and invest in Saudi Arabia , this will increase the economy .
Third challenge, Iran’s return to world oil markets that effect Saudi Arabia’s oil in bad way . That Iran expected to increase the supply by 1.5 million barrels of oil a day back to the market by the end of 2016 with lower price. So, they are huge competitor to Saudi Arabia that affect their revenues. Also, OPEC want to decrease the production of oil , but Iran don’t agree that make the price of the oil low because supply higher than demand . Third challenge , oil in North America is led USA to give up imports from Saudi Arabia for oil ,so that led to losing big customer .That USA will depend in their oil by producing their oil in common years . Fourth challenge , high consumption of power in the local that will led to reduce the export of oil, that consumption of power increase by 7% yearly . Also. This consumption of oil , led KSA to change from export oil to import oil , because they use oil for produce electricity. Fifth, KSA plan for diversify their economy in 1970 , but because of structural problem isn’t happened. So, KSA have problem with implement their plans or programs in the real live .
policy options to overcome them :
•For the American oil challenge , Saudi Arabia should produce more oil with lower price , because USA’s oil have high cost of production , so their oil is very expensive than KSA’s oil .
•Iran return in oil market is huge problem for KSA , but they can overcome this by provide strong relationship with international countries to keep buying from KSA’s oil .
•Reduce the consumption of Saudi citizen by taxes or reduce subsidies for the power that use oil in production .
•To overcome the implement the plan problem , should the government have strong rules to let everyone do the work probably. Also, to overcome this challenges ,Saudi Arabia shouldn’t just build strong vision or plan such 2030 , but should do it to develop their economy.