Saudi Arabia faces tough choices on oil dependency


A perfect storm for Saudi Arabia may mean the golden age of oil is coming to a close.

Low oil prices threaten the kingdom’s oil-dependent economy, and “doing nothing means it runs out of money by 2020,” said John Mauldin, chairman of Mauldin Economics.

World oil prices fell yet again on Monday.

Mauldin told “Closing Bell” Monday that Saudi Arabia is acting like a company, taking the proper steps to stay afloat.

Oil refinery

Getty Images

Still, Saudi Arabia is not a company. Federal cuts in spending will largely affect the population, the majority of whom works for the government.

“With 90 percent of people working in the government,” Mauldin said, “People are going to be angry.” He points to the younger generation of Saudis to negotiate this post-oil state together.

Further West, Mauldin predicts that the “wildcard player” United States will be able to make a profit, unlike Saudi Arabia, at $40 per barrel due to low production costs and innovative technology. Mauldin said even if the price hits $60, it “doesn’t get Saudi Arabia back to where they need to be to be able to go back to the good old days.”

Oil prices fell below $36 a barrel on Monday, with WTI closing at a one-month low.

Leave a Reply

Your email address will not be published. Required fields are marked *