October 24, 2008

Will Falling Oil Prices Delay Saudi Development Plans?

Some analysts argue that the development plans in Saudi Arabia could fall victim to falling crude prices. I'm not so sure.

Despite the global economic slowdown, Saudi development plans seem to be on track. SAMA assured us that both liquidity and bank deposits will be maintained, and that the impact of the global crises is "limited". However, oil prices are down to around $70 a barrel this month from double that three months ago.

I am convinced that conservative fiscal policies will put Saudi Arabia in "good" stead at least for the time being. Remember that current year's budget is based on a price of around $45-50 a barrel. In other words, we are OK as long as oil prices are above $50...more or less.

The two critical questions are: will we spend 410 billion riyals ($109 billion) in 2008? Will Aramco still plan to invest $129 billion over the next five years?

We'll find out in the next few months.

Finally...The Euromoney Conference in Cairo was a success (every single minister - except Boutros Ghali, the Finance Minister - said all is OK!!). See you later.

Life goes on….
Abdullah Al Alami

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