Oil revenue made up more than 90 percent of the total revenues for Saudi Arabia despite a steady decline in production. With a choppy 2012 drawing to a close, the Saudi finance minister said the kingdom had run a multibillion-dollar budget surplus. Despite a tense economic year, the ailing Saudi king, for his part, said there was “plenty of wealth” in the kingdom. Production from non-OPEC members could put a strain on Riyadh’s budget for next year, however. And, should lawmakers in the United States fail to reach a budget deal before markets re-open Wednesday, oil prices could slump further on concerns of a recession from the world’s top oil consumer.
Riyadh in 2012 offered a balance to oil markets struggling with lower production volumes from Libya and Iran. Saudi Finance Minister Ibrahim al-Assaf said last weekend that oil sales helped create a budget surplus for 2012 that was around $102 billion. At the height of early tensions with Iran this year, the kingdom produced around 9.9 million barrels of oil per day. With oil revenue exceeding expectations for the year, ailing King Abdullah said “there is plenty of wealth” for the country. Assaf, however, said it’s best to be cautious given production increases from other major producers. Global market conditions for 2013, he added, may spell trouble for a country that depends on oil to maintain its leadership position among Arab economies.
Crude oil imports for the United States, meanwhile, are down to their lowest level in 12 years. New technologies used in the production of shale oil means the country, the world’s largest oil consumer, is pumping about 7 million barrels of its own oil per day, the most in nearly 20 years. Despite the boom, failed budget negotiations could put the world’s leading economy into a tailspin. U.S. President Barack Obama said during the weekend that it would be “very hard” to keep his economy moving forward in 2013 without some sort of agreement from lawmakers who so far seem very far apart on reaching a budget deal. A $536 million tax increase, coupled with a $110 billion loss in government spending, may push the U.S. economy back into recession in 2013.
By November, Saudi Arabia was producing about 9.6 million bpd, reflecting an overall decline among members of the OPEC cartel. For the economy next year, the country’s finance minister said he expected the budget surplus for the oil-driven economy to be $2.3 billion, which would represent a significant decline from 2012 figures.
Republican lawmakers in the United States accused Obama of embracing a “skewed” economic agenda that would hurt jobs prospects for most Americans. In 2011, political bickering in the United States prompted Standard & Poor’s to cut the country’s rating from AAA to AA+ for the first time ever. Fitch Ratings had said it may cut its U.S. rating should lawmakers fail to keep the economy from falling off the so-called fiscal cliff. Among the most contentious issues are tax cuts for the wealthiest Americans, which Republican leaders view as the lifeblood of the American economy. But with Riyadh saying it’s best to be “conservative” with its 2013 budget, it’s not just rich Americans that may be impacted by the inability of U.S. lawmakers to compromise, but the entire global economy as well.
By. Daniel J. Graeber of Oilprice.com
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