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Saudis Boost Gas Prices by 40%, Dismantle Welfare State To Wage War With U.S. Shale

Saudis Boost Gas Prices by 40%, Dismantle Welfare State To Wage War With U.S. Shale

As it turns out, it was better. This year’s deficit is expected to come in at around 15-16% of GDP, considerably below the 20% some analysts feared. For 2016, it looks as though the number should be somewhere in the neighborhood of 13%, broadly in line with expectations.

Be that as it may, the Saudis are boxed in as long as they insist on, i) keeping oil prices depressed, ii) maintaining the riyal peg, and iii) holding subsidies steady. If something doesn’t give with at least one of those imperatives, then the kingdom will continue to burn through its SAMA reserves which fell by $12.55 billion in November from October.

The problem is that deviating from any of the points outlined above has consequences. Allowing oil prices to rise risks putting uneconomic US production back online, dropping the riyal peg would be a significant black swan event for markets and would represent a landmark break with three decades of precedent, and easing up on the subsidies risks creating the type of social unrest that occurred elsewhere in the region during the Arab Spring.

Well it looks like when it came time to choose, the Saudis decided that the people will have to suffer because today, Saudi Arabia raised the price of domestic fuel by up to 40%.

And that’s not all.

Prices for gas, diesel, kerosene, water and electricity were also raised. 

Indeed, some Saudis were looking to fill up before the price hike:

…click on the above link to read the rest of the article…

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