Wednesday 13 April 2011

gulfnews : Opportunity in the Saudi oil conundrum

For all the principled criticism that "Gulfarism" (the recent expansion of welfare in the GCC states) has received, it looks like the most effective argument against it maybe petro-realpolitik.

The International Institute of Finance (IIF) believes that the recently announced social benefits in Saudi Arabia totalling $130 billion (Dh477 billion) will increase the target oil price it needs to balance its budget to $88 from $68 last year.

The IIF notes that many components of these benefits, such as new public sector jobs and unemployment benefits, are effectively irreversible and forecasts that Saudi Arabia will need oil to be somewhere between $100-$110 by 2015.

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