September 19, 2012
Trouble Brews in the Saudi Kingdom
John Allen Gay, The National Interest
A new report from Citigroup’s Heidy Rehman suggests that Saudi Arabia's domestic petroleum consumption may equal production in 2030, leaving none to export. Of course, it won’t get this far—the kingdom’s balance of trade would quickly become unsustainable as oil exports dropped—but the report still highlights one of the many distortions in the Saudi economy.
The kingdom, like many of its oil-rich neighbors, is a cut above the rest of the world in per capita oil consumption, thanks in great part to the use of oil to make electricity. Riyadh is able to provide oil to its power plants for just a few dollars a barrel, a practice that is cheap on paper but expensive in reality. With many Saudi crudes persistently fetching 100 dollars or more per barrel, each...
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