{"id":13543,"date":"2015-10-19T06:43:42","date_gmt":"2015-10-19T11:43:42","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13543"},"modified":"2015-10-19T06:43:42","modified_gmt":"2015-10-19T11:43:42","slug":"saudi-arabias-fiscal-break-even-oil-price-to-be-around-us-100-mark-for-the-foreseeable-future","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13543","title":{"rendered":"Saudi Arabia\u2019s fiscal break-even oil price to be around $US 100 mark for the foreseeable future"},"content":{"rendered":"

Saudi Arabia\u2019s fiscal break-even oil price to be around $US 100 mark for the foreseeable future<\/a><\/h3>\n
\n

The latest IMF Article IV consultation report on Saudi Arabia was published on 9 September 2015.<\/p>\n

http:\/\/www.imf.org\/external\/country\/sau\/<\/a><\/p>\n

Extract:\u00a0Government spending has increased substantially in recent years. Consequently, the breakeven oil price rose to $106 a barrel in 2014 from $69 a barrel in 2010. As a result, with the large decline in oil prices, the fiscal deficit has increased sharply and is likely to remain high over the medium-term. These deficits will rapidly erode the fiscal buffers (in the form of government deposits and low public debt) that have been built over the past decade.<\/em>\u00a0http:\/\/www.imf.org\/external\/pubs\/ft\/scr\/2015\/cr15251.pdf<\/a><\/p>\n

Let\u2019s put this into some graphs. We start with the fiscal deficit first, then look at the external balance.<\/p>\n

Expenditure<\/strong><\/h4>\n

\"\"<\/a><\/p>\n

Fig1: Expenditure, Budgetary Central Government Operations<\/p>\n

During the period of high oil prices until 2014, expenditure grew by 9-15% pa. In early 2015, King Salman disbursed a bonus of 50 bn Riyal to government employees, contributing to a 30% increase of the annual wage bill. Capital expenditure (transportation, health and education) includes the expansion works at Medina and Mecca.<\/p>\n

Budget Balance<\/strong><\/h4>\n

\"\"<\/a><\/p>\n

Fig 2: Budget revenue vs expenditure<\/p>\n

Oil revenue dropped sharply, starting in 2013 and leading to a negative balance by 2014. It will get worse in 2015. It is clear that the pre 2015 trend cannot continue. The IMF proposes a budget adjustment scenario (ii, Fig 7)\u00a0by initially reducing expenditure in 2016 and then increasing it moderately by 4% and later 1%.\u00a0 Oil revenue is assumed to grow along a recovery of oil prices.<\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

Fig 3: Budget balance as % of GDP<\/p>\n

In Fig 3, we take the balance from Fig 2 and add a curve (blue) as percentage of GDP. In 2015, the deficit reaches 20% of GDP. For comparison: commodity dependent Australia had a budget deficit of -2.6% of GDP in 2014\/15, the US estimate for 2015 is -2.7%.<\/p>\n

Oil price assumptions<\/strong><\/h4>\n

The underlying oil prices have been taken from the World Economic Outlook (WEO), assumed as follows:\u00a0\"\"<\/a><\/p>\n

Fig 4: Oil price assumptions and Saudi budget balance<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Saudi Arabia\u2019s fiscal break-even oil price to be around $US 100 mark for the foreseeable future The latest IMF Article IV consultation report on Saudi Arabia was published on 9 September 2015. http:\/\/www.imf.org\/external\/country\/sau\/ Extract:\u00a0Government spending has increased substantially in recent years. Consequently, the breakeven oil price rose to $106 a barrel in 2014 from $69 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3],"tags":[6292,195,418,434,588,1775,595,596,701],"class_list":["post-13543","post","type-post","status-publish","format-standard","hentry","category-energy-2","tag-crude-oil-peak","tag-debt","tag-imf","tag-international-monetary-fund","tag-oil","tag-oil-price-collapse","tag-oil-production","tag-oil-supply","tag-saudi-arabia"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13543","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13543"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13543\/revisions"}],"predecessor-version":[{"id":13544,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13543\/revisions\/13544"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13543"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13543"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13543"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}