Mr. Naimi’s message Thursday was simple: very high oil prices are bad for the global economy, which is ultimately bad for oil demand, and Saudi Arabia will act to bring them down. He singles out Europe in particular as an example of a weak economy being undermined further by high energy costs, a point echoed in the OECD’s latest assessment of economic prospects, also released Thursday.
Oil accounts for 45% of Saudi Arabia’s economy and the vast majority of its (swelling) public budget. Its rulers know that geopolitical risks centered on Iran are keeping prices high. That is encouraging consuming countries to look for alternative energy sources, reduce energy consumption, and even consider releasing barrels from strategic reserves.