Saudi Arabia, the G20 summit and oil
The decrease in oil prices is the result of surpluses and not because of a political decision that could harm the Saudi economy
Saudi Crown Prince Salman bin Abdulaziz arrived in the Australian city of Brisbane for the G20 summit on Thursday. His arrival was preceded by a wave of questions and analyses about the course of future oil prices. Is it a war against Iran and Russia? Or is it a war against U.S. oil production? Or is it merely a new chapter in the historical oil cycle?
The G20 summit in Brisbane will not only discuss energy-related issues but more urgent political meetings will also be held on the sidelines, including expected discussions on war and peace in Syria, Iraq and Iran, talks on armed extremism and the situation in Ukraine as well the environment and Ebola epidemic.
Saudi Arabia holds key to oil stability
Saudi Arabia is OPEC’s largest exporter and producer and it holds the key to the energy market’s stability. However, it’s not a fan of mixing politics with the issue of oil as it is aware that such a game would be dangerous and could threaten the livelihoods of its citizens.
Saudi Arabia is not a fan of mixing politics with the issue of oil as it is aware that such a game would be dangerous and could threaten the livelihoods of its citizens.Abdulrahman al-Rashed
After a lot of talk about sliding prices, Saudi Oil Minister Ali al-Naimi issued a statement, denying any political motive behind decreasing prices, adding that only the market controls oil prices. He was responding to recent allegations that Saudi Arabia was seeking to politically pressure Iran and Russia by decreasing oil prices in a bid to force the two into adopting certain political stances!
When considering this previous allegation, one can see that it is illogical for obvious reasons. First, there are no political stances required from the two countries – Iran and Russia – that would necessitate such a dangerous adventure that would harm the country’s only national income. Even with decreasing oil prices, it is unlikely these two countries will alter their stances.
As for the second “accusation,” which alleges that Saudi Arabia is decreasing oil prices to confront the American oil and shale gas industries, this is much too great a task for a single country to accomplish. Saudi Arabia knows that the pricing strategy is not only its responsibility and that it’s a matter that concerns all oil-producing countries. It is true that we are observing with concern the continuous decrease of the price of oil – it fell to $80 a barrel for the first time in four years – but Saudi Arabia learned from the harsh experience of the 1980s not to be the sole one to pay the price. Back then, Saudi Arabia adopted the policy of acting as a “swing producer” which had harmed the country’s economy.
The government in Riyadh must foresee the near future because it carries difficult economic challenges and it must have a plan for confronting them on the domestic level. The United States has become an oil-producing country, producing around 9 million barrels a day – close to Saudi Arabia’s 9.6 million barrels per day output. The United States will export around 1 million barrels a day next year, after the country used to import 13 million barrels a day. This is an astonishing shift, in addition to the discovery of many petroleum reservoirs in other marginal countries. And who knows?! Chinese consumption may decrease due to China’s domestic economic circumstances.
The government in Riyadh must foresee the near future because it carries difficult economic challenges and it must have a plan for confronting them on the domestic level.Abdulrahman al-Rashed
The decrease in oil prices is the result of surpluses and not because of a political decision that could harm the Saudi economy, other oil-producing states, as well as the new oil industries such as American shale due to their high costs. Whether oil prices decrease or increase, oil continues to be a means of developing the economy and is not a mere wallet we spend from until a day comes when we can no longer depend on it.
This article was first published in Asharq al-Awsat newspaper on Friday, Nov. 14, 2014.
Abdulrahman al-Rashed is the General Manager of Al Arabiya News Channel. A veteran and internationally acclaimed journalist, he is a former editor-in-chief of the London-based leading Arab daily Asharq al-Awsat, where he still regularly writes a political column. He has also served as the editor of Asharq al-Awsat’s sister publication, al-Majalla. Throughout his career, Rashed has interviewed several world leaders, with his articles garnering worldwide recognition, and he has successfully led Al Arabiya to the highly regarded, thriving and influential position it is in today.
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