Saudi Arabia Reaps Big Profit From Oil Price Hike

General Authority for Statistics (GASTAT) of the Kingdom of Saudi Arabia released a report on Thursday that showed the oil sector booming with a 10% growth, in large part due to President Joe Biden’s criticism of the American energy sector, while unemployment fell to 10.1%, its lowest level since 2008.

President Biden’s efforts to wheedle or cajole more oil out of the Saudis on his visit in July, a last-ditch effort to bring down U.S. petrol prices before the midterm elections, will be complicated by the robust Saudi economy. The Saudis will have no incentive to raise production in order to lower oil prices because Biden has little influence over them.

The Saudi economy expanded by 3.7 percent outside of the still-dominant oil sector, while Biden’s policies have brought America dangerously close to entering a recession.

The reforms carried out under Saudi Vision 2030, the extensive reconstruction plan conceived and shepherded by Crown Prince Mohammed bin Salman (MBS), the de facto leader of the country, were praised by the World Bank for having helped Saudi women make “unprecedented progress in joining the labour market” in March.

The World Bank estimated that these reforms will have an impact on women for many generations to come and that they already benefited 6 million Saudi women over the age of 21.

Beating estimates

According to official figures released on Tuesday, Saudi Arabia’s gross domestic product expanded by 9.9 percent in the first quarter, the fastest rate in ten years and higher than the 9.6 percent flash estimate from last month.

According to Monica Malik, chief economist at Abu Dhabi Commercial Bank, the increase in oil output played a significant role in the quickest expansion since the third quarter of 2011.

The General Authority for Statistics stated that “this gain is attributed to the considerable increase in oil activity by 20.3 percent.”

After registering a stronger-than-expected recovery in 2021, the Saudi Arabian economy is on an accelerated path to growth in 2022, driven by higher oil prices and non-oil activities, as oil production strengthens and pandemic pressures fade, says WB.

Saudi Arabia’s direct trade with Russia and Ukraine is limited. Economic fallout on the oil markets from the war in Ukraine has strengthened Saudi Arabia’s medium-term fiscal and external outlooks.

Any new COVID-19 variants, tighter global financial conditions, and volatile oil prices are key risks

Outlook

Growth is expected to accelerate to 7% in 2022 before leveling out at 3.8% and 3.0% in 2023 and 2024, respectively. Stronger oil output is the main driver behind the recovery, which is expected to grow by 13% in 2022 following the end of the OPEC+ production cuts in December 2022.

“The non-oil sector is expected to continue its trajectory for growth, estimated at 4% in 2022 and 3.2% in the medium-term. Despite headwinds from tighter fiscal and monetary policies in the medium-term, stronger private consumption is anticipated, as well as an increase in religious tourism and higher domestic capital spending—signaled through the PIF and other state agencies.

“Headline inflation is projected to slow and hover at about 2% in 2022 as result of a stronger US dollar, against which the Saudi Riyal is pegged, and tighter monetary policy,” the World Bank adds.

Oil Profit

Aramco announced a 124 percent increase in net earnings for 2021 in March. In the wake of Russia’s invasion of Ukraine, oil prices rose to a 14-year high of $139 a barrel.

According to World Oil, oil has increased by over 60% this year as tighter markets as a result of Russia’s invasion of Ukraine have coincided with resurgent demand from nations recovering from the pandemic.

The war has stoked inflation, raised the price of petrol and food, and forced central banks to tighten the money supply aggressively.

Following repeated requests from the US to increase output, OPEC+ agreed in June to speed up output increases.

For July and August, the producer group announced that it will increase production by 648,000 barrels per day, or approximately 50% higher than in recent months. The group has recently struggled to reach its supply goals, raising concerns about its ability to complete the task.