Comment by Jerry2 | Hacker News Reader

Comment by Jerry2 | Hacker News Reader

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Looks like Saudi regime is in big trouble. They won't be able to balance their budget with oil prices so low and they won't be able to make payments to thousands of their princes.

I did some searching and found few interesting data points:

>For dozens of oil producers, the plunge in oil prices is devastating. No major oil producer can balance its budget at prices below $40; according to the International Monetary Fund, with the exception of Qatar, every country in the Middle East requires at least $60, with Algeria at $157 and Iran at a whopping $390. The average Brent price of oil over the past month has been a hair above $20. [1]

and this from 2019:

>Top oil exporter Saudi Arabia would need oil priced at $80-$85 a barrel to balance its budget this year, an International Monetary Fund official said. [2]

Given that WTI is at $19 and Arab Light at $21, there's going to be lots of internal changes in ME in the coming years. Probably a few wars too.

[1] https://www.bloomberg.com/opinion/articles/2020-04-29/covid-...

[2] https://www.reuters.com/article/us-saudi-economy-imf/saudi-a...

I'm an Iranian who moved to the U.S. only a few years ago.

Something most people here in the U.S. don't understand is that countries like Iran have a far different threshold of pain.

Iran, as a result of sanctions had already entered starvation-levels of economic collapse. There are people who are sleeping in open graves. Yet, the regime is not backing down in any way. It hasn't change course at all.

Hi Emil. I just wanted to tell you I had a burst of nostalgia when I noticed your username. I got interested in computers and software browsing TechnoTux forums and trying (and failing) to install Parsix. I really appreciate the work you did on open source software and bringing them to Farsi speakers. I wish you the best wherever you are.

Oh a fellow Technotux member! I also burst into nostalgia reading your comment. I'm glad I was able to help. I Wish the same for you.

I'd draw a pretty significant distinction between Iran and Saudi Arabia.

Iran has a theocratic regime, and gets a lot of oil revenue, but is a fundamentally diversified and surprisingly self-sufficient economy. They have factories, an educated population, and they produce a fair number of things other than oil. Agriculture exists (if not self-sufficient).

Saudi Arabia is oil rich. The princes are oil rich. The wealthy are oil rich. Normal people are oil rich. It's oil, all the way down.

The country simply doesn't produce anything else. Most of the citizens simply don't work -- at all. There's no plan B.

Iran can fall back to "hard times" and a pre-oil-wealth economy. SA can't. There's nothing else there except sand and starvation. They aren't going to "grin and bear it".

Fairly sure I'v seen news over the past few years about Saudi Arabia diversiftying.

From https://saudiembassy.net/agriculture-water -:

Today, Saudi Arabia exports wheat, dates, dairy products, eggs, fish, poultry, fruits, vegetables and flowers to markets around the world. Dates, once a staple of the Saudi diet, are now mainly grown for global humanitarian aid.

...

As a result, there has been a phenomenal growth in the production of all basic foods. Saudi Arabia is now completely self-sufficient in a number of foodstuffs, including meat, milk and eggs.

From https://saudiembassy.net/energy -:

In addition, with the discovery of deposits of precious and semi-precious metals, Saudi Arabia expects to become a major exporter of minerals in the coming decades.

...

Exploration projects over the past two decades have unearthed extensive deposits of precious and industrial minerals throughout the country. These include not only gold and silver, but also copper, tin, tungsten, nickel, chrome, zinc, lead, phosphates, iron ore, bauxite, potassium ore and even table salt.

I would speculate that most of what SA exports is heavily subsidized and unprofitable. Dates flourish in the Arabian desert around an oasis. Where are they getting the water for the dates and water for milch for dairy, ...?

Probably desalination plants run on Oil.

I am sure they can keep doing this but this is not a natural extension of any of their strengths. Their labor is over priced and mostly imported south asians, overburdened by heavy bureaucracy and lacking in the inputs of production.

Would you open a dairy farm in Namibia? If they really have to tighten their belts they will have to cut down on all these "extra-curricular" economic activities.

I mean, sure, they've made nominal efforts. I hope they succeed. But the fact is, here's the current breakdown of exports: https://oec.world/en/profile/country/sau/

>current

Data is from 2017. Single largest non-petro export being aluminum, at 0.51%.

I'm a Saudi citizen, and most of you just wrote is false & completely not true..

" Most of the citizens simply don't work -- at all"

Where in the world you got this??

What does sleeping in an open grave mean?

While you were in Iran, were you involved in what the US called the Arab Spring? Was it really spread by Twitter? Did it seem like the regime might topple?

That means they find an unused grave and sleep in it [0]. Google images has some pretty disturbing pictures of the phenomena.

Iran had green movement [1] which happened earlier than Arab Spring. Peaceful protesters rushed to the streets after a fraudulent election and hundreds were murdered by the regime.

The other candidates have been under home arrest ever since.

[0] https://en.wikipedia.org/wiki/Grave_Dwellers

[1] https://en.wikipedia.org/wiki/Iranian_Green_Movement

You're right. I was thinking of Green Movement, not the Arab Spring. Thankss for correcting.

The fuck is up with the downvotes?

It seems like the Arab spring was mainly caused by a spike in food prices.

>Probably a few wars too.

Not sure how you're gonna fix this with wars given that every oil producer is underwater. Even if you capture someone else's oilfields...then what? Produce oil there at a loss too?

Modern wars aren't fought out of rational calculation that they'll improve the situation. They're fought when existing conflicts have their flames fanned just a bit too much, or when factors holding them in check suddenly change. I think the smart money is that oil prices will recover soon - but if they don't, we'll discover a whole world of conflicts which were previously suppressed by the reliable invariant of a rich Saudi government.

Broke governments can't subsidize food, water, medical care, or other services. The Arab Spring was kicked off by a local drought and rising food prices. It's easy to support a repressive monarchy when the money is flowing and you're sittin pretty while well fed, and in comfy AC.

Example: https://www.theguardian.com/lifeandstyle/2011/jul/17/bread-f...

The Arab Spring in Syria led to rebellions that spilled into Turkey and Iraq (Kurds, ISIS, Russian and US intervention, etc.).

> Even if you capture someone else's oilfields...then what? Produce oil there at a loss too?

They're not after oil fields per se, but changes in control, money, and other resources. If oil is so cheap that the price is negative then it means you can fly your attack craft without worrying about fuel costs...

Here's the break even breakdown

https://data.imf.org/regular.aspx?key=60214246

Though Saudi has been aware of its dependancy upon oil and beena primary driver in much investment, though when much of that investment has been in other companies - then for them it is a double hit.

Unsure how advanced along their migration away from oil money is over alternatives, but will be further along than other oil dependant countries.

Though this will help focus many more minds away from oil, so that is not a bad thing at the end of all this.

Can you explain what it means to balance the budget? Is it like break even price for the industary?

To add to the other reply - the dollar per barrel price required to balance the national budget is typically much higher than the price required for the oil extraction to break even.

In countries like Saudi Arabia they fund their government budget via oil revenue.

Thousands of princes will go hungry. Even prince Mohamed "bone saw" might lose a few pounds. Bad news everywhere...

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