Saudi Arabia could go bankrupt within five years - IMF

[smotherb]

10 years ago the oil price was $50 a barrel and the Saudi's were making a good profit. So why are they making a loss now?

they are not making a loss and nobody, except some poor envious Russian journàrselist, thinks the country will go bankrupt. read the rubbish in "Sputnik News" and judge yourself.

by the way, "poor and envious" and not to forget "ignorant" applies also to some of the commentators in this thread

Russian propaganda? Well, other reputable sources similarly speculate, according to several news sites--research it and see. One, I believe sums it rather well.

" . . . Saudi Arabia's outlook was particularly bleak, said Bloomberg Business, with the IMF saying the country could run out of financial assets it needs to support the country's spending in five years . . . "

http://www.newsmax.com/TheWire/imf-saudi-arabia-broke/2015/10/23/id/697664/

Both Bloomberg and the IMF are reputable sources, if they indeed said this. Note, it says the IMF says, "could" run out of funds to support spending. Is that broke?

Here is the October 15, 2015 IMF Country Report on Saudi Arabia http://www.imf.org/external/pubs/ft/scr/2015/cr15286.pdf

[laislica]

As one that worked for 4 years in the kingdom, I would be very happy to see them bankrupt, and going back to riding camels. I have no happy memories of the place, and like most that worked there, stayed only for the money.

However, the injunction on all Muslims that are able to visit Mecca during their lifetime is a huge money spinner, so I doubt they will go bankrupt.

They real reason, though not given, they are having financial problems, is that the royals, and there are thousands of them, suck much of the money for their extravagant lifestyles, and a lot is given to the religious sector to keep them pacified.

If I were to write about the lifestyle of the royals, I doubt that anyone not been there would believe me. I wouldn't believe it unless I'd been there!

I totally agree.

I was there in 1970 but the money was not good, I was not in the oil industry.

I did not renew the contract after doing the mandatory year!

That was the year that they moved the public be-headings to Taif following Global Media outrage.

Then the actual Saudi's were lazy, bought their qualifications, did no work, just took the salary whilst other foreigners did their jobs for them at a fraction of the cost.

Totally corrupt.

They slip huge amounts of cash to Muslims in other countries and manipulate them.

Almost as bad as the CIA or MI6 LOL

Let's hope that the price of oil falls even further soon!

[dhream]

It's an oil war, people. Fracking of shale in the USA has changed America from an oil importer to an exporter.

The Saudi cost of production is less than $10 a barrel, and well depletion rates are low. The American cost of production is $40-$50 a barrel, and well depletion rates are high.

The Saudis are hoping to bankrupt American producers by overproduction, driving the price down to levels where US wells lose money. US wells are heavily indebted, so they are hoping the flow of fiat money at very low interest rates will continue.

Who will blink first? Good question. My money would be on the Saudis, not because I particularly like them, but because the only asset America has now is the acceptance of the greenback as the world reserve currency. There's only so much money a country can print before the rest of the world starts calling debt in.

bazza I was thinking about the dollar, and the debt, and the fed, etc etc.

Some of my nest egg is in gold, and the only way I can see gold improving is by the dollar collapsing, drastic to be sure.

What if China calls in its Treasuries? Will the fed will be rooted? Surely to repay that they'd need to print? With the dollar then dropping it could become a death spiral as they print more to pay china in dollars worth less each week?

What if China is accepted as a reserve currency then starts messing with rates and so forth to destabilise the dollar?

What if the Fed itself collapses under the weight of domestic debt in the trillions?

I don't know much about high finance, but these sums are just astronomical, how can they ever get the debt under control? Will they just write it off somehow?

I'm astonished that there has been no meltdown yet, the ECB is little better placed with the on again off again greek tragedy, it's all seemingly a on a knife-edge, but it just seems to get forgotten until the next 'scare'.

Do you think it's possible there even will be such a catastrophic event as a direct result of this situation in the near future and how do you think it will play out?

All other posters are welcome to add their thoughts, on the demise of the dollar and the western banking system as we know it, what do ya reckon guys?

Be kind gentlemen, I never claimed finance was my major, so if I'm talking out my ass, realise I'm ASKING not STATING anything above as a fact, i have no idea to be honest!

[attento]

This was bound to happen to a Country that relies on Oil sales alone, The world is awash with oil, Countries and public are more savvy now. They dont use the Car so much , Also cars are more Efficient now, OIl companies technology is advancing, They can drill deeper on land or sea, new chemicals are purging old wells and bringing out more oil. The world will never us as much oil as it has in the past.Plus with things changing in the Middle East more Countries are now putting oil into the oil market, becasue before they had embargoes on them. America is not taking as much oil out of this market,

"They don't use the car so much......." Maybe, but what about the 20+- million ( !) new car registrations in China this year. And more next year, and so on.

It would take an amazing amount of efficiency improvements and driver restraint to balance that.

Oil is a global commodity. Usage figures in any one country might be misleading.

[cdnvic]

Please stick to the topic. Your personal finances can be discussed elsewhere.

[Naam]

Unfortunately I think you are right. The price of oil was manipulated and brought down primarily to harm the Russian economy but this will not go on forever. I would love to see the Saudis go broke but don't think it will happen.

The price was manipulated for a short time, but now the price is down because the USA is no longer importing oil due to the large scale fracking that is going on inside the USA.

Also APEC has not decreased their oil production to offset what the USA is now producing so their is a surplus in the market. So the oil supply is up and with the USA not needing to import the demand is less than supply simply economics.

no fairy tales please!

In 2014, about 27% of the petroleum consumed by the United States was imported from foreign countries,¹ the lowest level since 1985.

http://www.eia.gov/tools/faqs/faq.cfm?id=32&t=6

The United States imported approximately 9 million barrels per day (MMb/d) of petroleum in 2014 from about 75 countries. Petroleum includes crude oil, natural gas plant liquids, liquefied refinery gases, refined petroleum products such as gasoline and diesel fuel, and biofuels including ethanol and biodiesel. In 2014, about 80% of gross petroleum imports were crude oil, and about 46% of the crude oil that was processed in U.S. refineries was imported.

[jacko45k]

As one that worked for 4 years in the kingdom, I would be very happy to see them bankrupt, and going back to riding camels. I have no happy memories of the place, and like most that worked there, stayed only for the money.

However, the injunction on all Muslims that are able to visit Mecca during their lifetime is a huge money spinner, so I doubt they will go bankrupt.

They real reason, though not given, they are having financial problems, is that the royals, and there are thousands of them, suck much of the money for their extravagant lifestyles, and a lot is given to the religious sector to keep them pacified.

If I were to write about the lifestyle of the royals, I doubt that anyone not been there would believe me. I wouldn't believe it unless I'd been there!

I worked there somewhat longer and have some similar opinions, and some different.

I do have some good memories, in my early days there (early 80's) there was some great camaraderie with fellow workers and other nationals. Things deteriorated after the Gulf War and a muslim/non-muslim divide widened.

I personally didn't get to meet any royals but of course saw some of the many palaces. The Saudi Princes' extravagances and excesses were better known outside the country in places like London and Switzerland. Yes, too many ordinary Saudis saw little of the great wealth. Yet ,since the oil is relatively cheaply produced, and I believed there were still huge reserves (in the empty quarter, Al Rub al Khali), plus oil will still be in demand, I hope it is the elite who cut back and the country will never be 'poor'.

Anyhow, long way to go before the country's debt is anything like that of say the USA.

Edited October 27, 2015 by jacko45k

[t8769]

I worked for the Saudis and yes, their extravagance in spending is beyond the imagination of any Westerner. I saw money thrown around like it was worthless. They made Donald Trump look like a penny pinching miser. We rented an entire floor of the Four Seasons Hotel in LA, and that wasn't much of the money they were spending.

The IMF gets things wrong all the time. They confidently predicted Britain's ruin 5 years ago when the Conservatives took over, the economy is now one of the stongest in the world. I think that was a political statement more than economic.

I'm no fan of the Saudis, not by a long shot. But they have one of the few stable countries in the region.

Now they are collaborating with Israel on military matters - nothing is what it seems in the Middle East - and if you think you've worked out what's going on, you're probably wrong.

[sirineou]

But oil prices will peak up again to $100 or more within less than 5 years, perhaps just 1-2 years.

based on what ... wishful thinking?

based on the fact that a lot of the expensive to extract oil will become , well, just that, too expensive to profitable extract.

reducing supplies and increasing price. As price increases many of those expensive to extract sources will come back on line this will cause a roller coaster affect on price. I believe for a while oil will stabilize at $60 but of course there are other variables such as increased demand from an economic recovery in Europe, China, perhaps economic expansion in India etc etc.

[Dustdevil]

But oil prices will peak up again to $100 or more within less than 5 years, perhaps just 1-2 years.

If that happens, US shale producers will simply rev up again to reap the rewards for patience. The sooner the better, to drive the Wahhabi p***ks back to the desert.

[Dustdevil]

They also have substantial phosphate deposits, bauxite and gold.

They are developing manufacturing, education (some very large universities) and have substantial overseas investments.

In 5 years, the world could be as different as it was 5 years ago - and nobody can predict much, especially IMF given their track record.

Arab universities are not competitive internationally.

[Dustdevil]

It's an oil war, people. Fracking of shale in the USA has changed America from an oil importer to an exporter.

The Saudi cost of production is less than $10 a barrel, and well depletion rates are low. The American cost of production is $40-$50 a barrel, and well depletion rates are high.

The Saudis are hoping to bankrupt American producers by overproduction, driving the price down to levels where US wells lose money. US wells are heavily indebted, so they are hoping the flow of fiat money at very low interest rates will continue.

Who will blink first? Good question. My money would be on the Saudis, not because I particularly like them, but because the only asset America has now is the acceptance of the greenback as the world reserve currency. There's only so much money a country can print before the rest of the world starts calling debt in.

The U.S. has creative, efficient, hard-working, inventive and resilient human resources. It was the computer revolution in the 1990s, for example, that created a great economy for the Clinton years. Saudi Arabia has lazy incompetent people who prefer to pray five times a day and ascribe everything to God's will.

[nithisa78]

Not going to happen. Even when oil hits $35. per unit.

[Dustdevil]

Good time to be buying shares in companies involved in oil drilling. The price won't stay at $50 forever.

There might be some opportunities in energy, but I'd be careful of drillers. Some of them have very shaky balance sheets and their credit ratings will make borrowing or refinancing very expensive. Some have already resorted to (trying to) sell more equity and suspend dividends. Even if oil (& natural gas) reaches a more economic price, it'll be awhile longer before anyone wants to do more drilling, especially at previous day-rates and some of the drillers have aging equipment that they can't afford to upgrade/replace.

Never stayed in Saudi. They seem to be drawing negative comments from some posters who may or may not know about the people. I stayed in the UAE for ten years and really enjoyed my life there. Money and living conditions were a part of it, but I also found the people to be quite nice ... the small percentage who were actually Emirati. I guess I'd like to see some of the young people to have to get their hands dirty rather than having foreigners waiting on them hand & foot, but still wish them well. Obviously there will need to be some belt-tightening that may come as a shock to its citizens, but that was starting some years ago.

Yes well I spent 9 years in the Emirates and 10 in Saudi Arabia. Apparently you didn't learn much about the latter. Saudi is the worst country I've ever been in, in 40 years of worldwide travel and residence. As for Emiratis, I generally did not like or respect the narrow-minded, hateful little princesses at Dubai Women's College, but male students at other institutions were ok. They weren't so sheltered or as easily influenced by propagandist local media.

[Dustdevil]

i cant say I would be sorry to see that happen. Though, America can not and will not let that happen. The fear of a radical Islamist government controlling all that oil would ensure this.

Don't be silly. The U.S. is pining for the day when it can disengage from oil sheikhdoms entirely.

[yaudah]

Yeap, Sow-Dee !

This on the other hand would be good news....................

Back to the desert, tents and goat herding while keeping the stove running on Camel dung.

But then, I am sure the imbecile Europeans will bail them out.

[FangFerang]

Saudi? Bankrupt?

The chance of that is about as likely as an open and transparent election in Thailand this century.

[Scott]

Off-topic post removed. The topic is about Saudi Arabia.

[regfrancis]

Yes, solar power can be stored in many forms. Technology is leaping ahead- need I remind you

The suns always shining on half the world -and electric wires have been around a while.

[csabo]

Maybe stop donating to the Clinton Foundation? Should save a few billion.

[GOLDBUGGY]

It's an oil war, people. Fracking of shale in the USA has changed America from an oil importer to an exporter.

The Saudi cost of production is less than $10 a barrel, and well depletion rates are low. The American cost of production is $40-$50 a barrel, and well depletion rates are high.

The Saudis are hoping to bankrupt American producers by overproduction, driving the price down to levels where US wells lose money. US wells are heavily indebted, so they are hoping the flow of fiat money at very low interest rates will continue.

Who will blink first? Good question. My money would be on the Saudis, not because I particularly like them, but because the only asset America has now is the acceptance of the greenback as the world reserve currency. There's only so much money a country can print before the rest of the world starts calling debt in.

Who will blink first? That is a Good Question!

It is my experience with Saudis that they will not back down from any of this until they get there way and no matter how long it takes. The Saudis are in the Driver's Seat and they bloody well know this. They lost their biggest and best customer (USA) and they want them back to the buying table. It might be considered dirty business in shutting down your competitors with your low prices, but as they say "Business is Business".

It is not only the Frackers of Shale Oil who is effected but also Heavy Oil. Heavy Oil is also expensive to produce and I personally know of 3 Oil Companies who did go Bankrupt this past year. But Heavy Oil mostly effects Canada, Russia, and Venezuela, so not the prime target. Just secondary targets. Tar Sands are also producers of expensive oil, but at $45 they can still keep their head above water. But not by too much. It did shut the door on future invests though.

Saudi Arabia going Bankrupt is pretty strong words and for sure an over exaggerated. They have many resources they haven't even tied into yet. To appease the public and hopefully prevent terrorism from spreading to the Kingdom, Social Spending has been huge. There is no taxes in Saudi Arabia and I don't think this will change. Interest Free Housing Loans are very common. They also enjoy free education for their citizens and medic care. Their Military Budged is also very huge. There is no Importation Tax on most everything so clothing and electrical appliances are very cheap to buy their.

The government also subsidizes many things in Saudi Arabia including food and fuel. I recall that Rice was so cheap their to buy that Farmers were using it as Chicken Feed, as this was cheaper. I recall filling my car up their the first time and all I could understand from the fuel pump was the numbers 3 and 1. So I thought it was 3 Saudi Riyals (almost 1 US Dollar) to a gallon of gas, and thought that was quite cheap then. But it turned out to be 3 gallons for 1 Saudi Riyal.

So they have a lot of ways of increasing their income or reducing there spending. But for now I think they will settle for issuing government bonds. Even if it becomes 20% of their present GDP, that would quickly be lowered on higher oil prices. Of which they have control of. At $50 a barrel that should shut down the Fracking Guys soon. Take some Heavy Oil Producers as well. But I don't see the price of oil going up until at least next year. Maybe longer???

[hugh2121]

As one that worked for 4 years in the kingdom, I would be very happy to see them bankrupt, and going back to riding camels. I have no happy memories of the place, and like most that worked there, stayed only for the money.

However, the injunction on all Muslims that are able to visit Mecca during their lifetime is a huge money spinner, so I doubt they will go bankrupt.

They real reason, though not given, they are having financial problems, is that the royals, and there are thousands of them, suck much of the money for their extravagant lifestyles, and a lot is given to the religious sector to keep them pacified.

If I were to write about the lifestyle of the royals, I doubt that anyone not been there would believe me. I wouldn't believe it unless I'd been there!

Perfectly summed up.

I also spent time working there, 5 years at Dhahran.

Edited October 28, 2015 by hugh2121

[hugh2121]

Saudi? Bankrupt?

The chance of that is about as likely as an open and transparent election in Thailand this century.

See comments from those who have spent time there.

[norfolkandchance]

Never mind all this. Can you still get decent SID ?

[deucebi]

It's all very interesting and also worrying, speaking as someone who is employed in the oil industry. A lot of countries around the world are severely scaling back spending on maintenence and exploration activities which is only going to lower capacity in a few years. Petrobras the Brazilian state oil producer has announced $11bn extra cuts to its budget but they are also trying to deal with massive corruption.

The Saudi's on the other hand are taking advantage of the global downturn to recruit oil workers and are actively tendering for 30 more offshore vessels. With half of the world's offshore fleet laid up with no work then the Saudi's are going to get them cheap.

When the worlds existing oil capacity starts to dry up then the Saudi's will be in pole position to take advantage of any surge that a global recovery may demand.

[GOLDBUGGY]

The US drillers and especially frackers are getting more and more efficient and production costs are going down. Frackers are profitable at today's prices.

Saudi and Russia depend on oil to run their economies. For the US, oil production is just a sideline. The US is more into tech and manufacturing and of course has the world's biggest and best farmland. It also has 88,000 miles of saltwater shoreline. It also has a lot of other minerals and natural resources such as timber and steel. Saudi and Russia are one-trick ponies.

Saudi can no longer sell all of the oil it wants to, much less at a price it sets. It is now hostage to the world oil markets and having failed to build a "real" economy, it will suffer.

The Saudis can always go back to humping camels riding camel humps.

I agree that no matter how you look at this, the United States won't lose. As an Major Oil Importing Country (or at least until recently) low Oil Prices are good for the States. It puts more money in the pockets of consumers and also keeps transportation costs to markets down as well. Farm Production Costs are also lowered.By-products like plastics and rubber also become cheaper to make.

The States should do what they always did in the past, which is shut-in their wells for a rainy day, and buy all the cheap Saudi Oil they can. They always know where they can find this oil, and start up for fracking is not that difficult. That then puts the United States in the Drivers Seat on Oil Prices. If it should rise again to high levels, all they have to do is start-up again and the price will come back down. Pumping your oil now, at cost, is a bad idea as far as I am concerned.

[GOLDBUGGY]

Never mind all this. Can you still get decent SID ?

Decent? (Ha!Ha!Ha!) That has got to be the most Ungodly Drink ever.

Mind you, after the first couple of shots with Diet Coke it was so bad. Kinda grows on you after awhile.

[louse1953]

Be a breakdown in the Middle East that would be a disaster for the world,

Big time, we need the Saudis believe it or not...

Oh yeah,it's a great place now.S A and the USA are the problem.

[hawker9000]

Doesn't Saudi Arabia still own about 8% of US Debt?

If they were going bankrupt there is about 1.5 trillion they could call in - which of course America couldn't pay without printing more .... that kind of thing could bring down a president, and would actually have more effect on the world economy than the actual bankruptcy of Saudi.

Were they to try & "call in" their investment, they'd immediately collapse the value of it, because they would in fact simply be forcing the US to print it. So not going to happen. Even failing to rollover existing investment would start to erode the value. I hate to see the dollar propped up by this kind of "protection racket", and don't believe it can go on forever - the piper eventually has to be paid - but for now it is what it is.

[norfolkandchance]

Camel racing was a good day out. The owners of the camels used to tie small kids on and away they went for 5 km.End of the race kids where untied and then tied on for the next race..You don't go to KSA for the culture, just the money