Media: Saudi Arabia miscalculated by unleashing a price war on oil markets

Media: Saudi Arabia miscalculated by unleashing a price war on oil markets


WASHINGTON, January 5. /Corr. Andrew Shitov/. Unleashing a price war in global oil markets, Saudi Arabia miscalculated. This opinion expressed in his article published on Monday, the Washington Post.

“The next victim in this war can be its own economy,” the publication says. It recalls that recently “Saudi Arabia is flooding the market with cheap oil in an attempt to squeeze out business competitors with high cost of extraction”.

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“But now it’s not as easy as before,” says The Washington Post, indicating that the producers of shale oil in the U.S. “can now maintain profitability at lower prices than before, and more importantly, to stop and resume the production as needed for relatively little money”. That is, “even if the Saudis forces them into hibernation, they will Wake up and see to it that prices did not rise significantly above $ 50 per barrel,” the magazine writes.

According to The Washington Post, afford to assume such a scenario Riyadh now. The budget deficit in the country rose to 15% of GDP, the authorities were forced to cut back fuel subsidies and take other austerity measures.

But these measures “don’t work”, predicts edition. First of all, because the Saudi Riyal is pegged to the US dollar, and that now becomes more expensive. For countries who receive payment for oil in dollars, but bearing the fiscal costs in their own currency, the best way – devaluation of the currency, says The Washington Post. Therefore, according to the newspaper, the ruble over the last two years has fallen by about 25%. But Riyal for the same period rose by 15%, and this undermines economic growth.

“With half the population under the age of 25 years, Saudi Arabia must provide people with work, if it is not able to provide them with social support, – says The Washington Post. – That is why other heavily oil-dependent countries such as Azerbaijan and Kazakhstan, have already abandoned the dollar peg. So the markets are already starting to bet that behind them will do the same and Saudi Arabia. Economic gravity, you can resist, but not indefinitely”.

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