What should be the minimum price per barrel of crude for Saudi Arabia in order for them to maintain subsidies to its population and to take care of the thousands of princes and princesses?

    IMF and Bloomberg estimate Saudi Arabia’s breakeven oil price between $90–$112, as the kingdom balances budget demands, Vision 2030 goals, and OPEC+ production cuts

    By
    Team PGurus
    -
    The real cost of Saudi Arabia’s oil dependence
    The real cost of Saudi Arabia’s oil dependence

    Saudi Arabia: Breakeven Oil Price

    The oil price Saudi Arabia needs to achieve to fully fund its budget is called the Fiscal Breakeven Oil Price. This figure changes annually based on government spending plans and non-oil revenues.

    Here are the key estimates for the price per barrel needed to balance the budget, covering all expenditures including public services, subsidies, and the costs associated with the vast royal family and ongoing economic diversification projects (like Neom):

    key estimates for the price per barrel needed to balance the budget
    key estimates for the price per barrel needed to balance the budget

    Why the High Price?

    The high breakeven price is necessary for several reasons:

    1. Social Contract: To maintain stability, the government provides extensive subsidies (fuel, water, electricity), high-paying public sector jobs, and housing support to the Saudi population.
    2. Vision 2030: The Kingdom is heavily investing in diversifying its economy away from oil, requiring massive spending on futuristic projects like Neom, which drives up the required revenue.
    3. Oil Production Cuts: Saudi Arabia has often cut its oil production as part of OPEC+ agreements to support prices. While this raises the price, it reduces the total volume sold, meaning a higher price is needed for each barrel to cover the budget gap.

    In summary, while the core budget might be covered in the $90s, meeting all the ambitious investment goals and maintaining the current spending pace likely requires oil prices closer to $100 to $112 per barrel.

    Team PGurus
    Team PGurus
    We are a team of focused individuals with expertise in at least one of the following fields viz. Journalism, Technology, Economics, Politics, Sports & Business. We are factual, accurate and unbiased.
    Team PGurus
    Latest posts by Team PGurus (see all)

    RELATED ARTICLESMORE FROM AUTHOR

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here