Saudi Arabia, a major player in the global oil market, is facing a dilemma as its fiscal breakeven oil price is rising rapidly. The breakeven oil price refers to the price at which a country needs to sell its oil in order to balance its budget.
In recent years, Saudi Arabia has been grappling with a number of economic challenges, including a growing budget deficit and declining oil revenues. The country relies heavily on oil exports to fund its government spending, and the sharp drop in oil prices in recent years has had a significant impact on its economy.
To make matters worse, Saudi Arabia’s breakeven oil price has been steadily increasing in recent years. According to a report by the International Monetary Fund (IMF), the country’s fiscal breakeven oil price rose from $66 per barrel in 2016 to $85 per barrel in 2019. This means that Saudi Arabia now needs to sell its oil at a higher price in order to balance its budget.
There are several factors contributing to the rising breakeven oil price in Saudi Arabia. One major factor is the country’s increasing government spending, particularly on social welfare programs and infrastructure projects. This has put pressure on the government’s budget and increased the need for higher oil prices to cover its expenses.
Another factor is the country’s declining oil production. Saudi Arabia has been cutting its oil production in recent years as part of a global effort to stabilize oil prices. While this has helped support oil prices, it has also reduced the country’s oil revenues and increased its fiscal breakeven oil price.
The rising breakeven oil price in Saudi Arabia is a cause for concern, as it puts pressure on the country’s finances and limits its ability to invest in diversifying its economy away from oil. To address this challenge, the Saudi government has been implementing economic reforms aimed at reducing its reliance on oil and boosting non-oil revenue sources.
Overall, Saudi Arabia’s rising fiscal breakeven oil price is a sign of the challenges facing the country’s economy. As the country continues to grapple with declining oil revenues and growing budget deficits, it will need to find ways to diversify its economy and reduce its dependence on oil in order to ensure long-term economic stability.