Economy of Saudi Arabia - Harr-economic Trend

Harr-economic Trend

Saudi Arabia was an economy based on subsistence agriculture by a population that was largely nomadic until the discovery of oil in the 1930s. It was not until the 1973 oil crisis that the country saw rapid growth, and GDP per capita soared by 1,858% in the 1970s (although that growth was concentrated with the ruling elite). GDP per capita shrank by 58% in the Eighties with slower growth and a growing population. However successful diversification efforts helped register a growth of 20% in the Nineties.

This is a chart of trend of gross domestic product of Saudi Arabia at market prices estimated by the International Monetary Fund (and other sources) with figures in millions of Saudi Arabian Riyals.

For purchasing power parity comparisons, the US Dollar is exchanged at 3.75 Saudi Arabian Riyals only. Mean wages were $14.74 per manhour in 2009.

As of August 2009 it was reported that Saudi Arabia is the strongest Arab economy, according to World Bank.

Saudi oil reserves are the second largest in the world, and Saudi Arabia is the world's leading oil producer and exporter. Oil accounts for more than 90% of the country's exports and nearly 75% of government revenues. Proven reserves, according to figures provided by the Saudi Government, are estimated to be 260 billion barrels (41 km3), about one-quarter of world oil reserves.

More than 95% of all Saudi oil is produced on behalf of the Saudi Government by the parastatal giant Saudi Aramco, and the remaining 5% by similar parastatal companies as of 2002. In June 1993, Saudi Aramco absorbed the state marketing and refining company (SAMAREC), becoming the world's largest fully integrated oil company. Most Saudi oil exports move by tanker from oil terminals at Ras Tanura and Ju'aymah in the Persian Gulf. The remaining oil exports are transported via the east-west pipeline across the kingdom to the Red Sea port of Yanbu. A major new gas initiative promises to bring significant investment by U.S. and European oil companies to develop nonassociated gas fields in three separate parts of Saudi Arabia. Following final technical agreements with concession awardees in December 2001, development should begin in 2002.

Due to a sharp rise in petroleum revenues in 1974 following the 1973 Arab-Israeli war, Saudi Arabia became one of the fastest-growing economies in the world. It enjoyed a substantial surplus in its overall trade with other countries; imports increased rapidly; and ample government revenues were available for development, defense, and aid to other Arab and Islamic countries.

But higher oil prices led to development of more oil fields around the world and reduced global consumption. The result, beginning in the mid-1980s, was a worldwide oil glut, which introduced an element of planning uncertainty for the first time in a decade. Saudi oil production, which had increased to almost 10 million barrels (1,600,000 m3) per day during 1980-81, dropped to about 2 million barrels per day (320,000 m3/d) in 1985. Budgetary deficits developed, and the government drew down its foreign assets. Responding to financial pressures, Saudi Arabia gave up its role as the "swing producer" within OPEC in the summer of 1985 and accepted a production quota. Since then, Saudi oil policy has been guided by a desire to maintain market and quota shares.

However, beginning in late 1997, Saudi Arabia again faced the challenge of low oil prices. Due to a combination of factors—the East Asian economic crises, a warm winter in the West caused by El Niño, and an increase in non-OPEC oil production—demand for oil slowed and pulled oil prices down by more than one-third.

Saudi Arabia was a key player in coordinating the successful 1999 campaign of OPEC and other oil-producing countries to raise the price of oil to its highest level since the (Persian) Gulf War by managing production and supply of petroleum. That same year, Saudi Arabia established the Supreme Economic Council to formulate and better coordinate economic development policies in order to accelerate institutional and industrial reform.

Saudi Arabia has announced plans to invest about $46 billion in three of the world’s largest and most ambitious petrochemical projects. These include the $27 billion Ras Tanura integrated refinery and petrochemical project, the $9 billion Saudi Kayan petrochemical complex at Jubail Industrial City, and the $10 billion Petro Rabigh refinery upgrade project. Together, the three projects will employ more than 150,000 technicians and engineers working around the clock. Upon completion in 2015-16, the Ras Tanura integrated refinery and petrochemicals project will become the world’s largest petrochemical facility of its kind with a combined production capacity of 11 million tons per year of different petrochemical and chemical products. The products will include ethylene, propylene, aromatics, polyethylene, ethylene oxide, chlorine derivatives, and glycol.