måndag 16 januari 2012

Saudis target 'triple-digit' oil price for the first time

Saudi Arabia said on Monday it wanted to keep crude oil prices at around $100 (U.S.) a barrel, the first time the kingdom has targeted a “triple-digit” price and a quarter above the previous ambition of $75 suggested by King Abdullah in November 2008.

Riyadh needs higher oil prices to sustain the big public rises in public spending it plans in an effort to forestall the political unrest sweeping the Middle East. King Abdullah has already announced two populist programs of handouts and boost to public spending.

The policies, at a total cost of $129-billion - equal to more than half the country’s oil revenues last year - vary from one-off bonuses for public sector workers to the promise of half a million homes at affordable prices. But the largesse failed to satisfy activists who were angry that the package of measures did not include political reforms.

The Institute of International Finance, a leading banking group, estimates that the break-even oil price the kingdom requires to balance its budget will jump from $68 last year to $110 in 2015. Only a decade ago Saudi Arabia was able to balance its budget with oil prices averaging $20-$25. In spite of high oil prices and production, Saudi Arabia has suffered a fiscal deficit for the last three years in a row.

Jawda, a Riyadh-based investment house, estimates that the kingdom’s fiscal expenditure would grow by 19 per cent this year, the biggest annual hike since 2006.

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