Sweeter news than any Halloween candy, the T. Boone Pickens’s blog is reporting that the Gulf monarchies are suffering from increased U.S. energy production that has helped keep the global oil price in check.
Perhaps the Saudis wanted the U.S. to bomb Syria, not just because it would help Saudi-sponsored rebels to defeat the Shia-backed Alawite regime in Damascus, because it would have helped increase instability in the Middle East and drive up oil market prices.
The next time our heads of state meet, U.S. presidents won’t have to hold hands with or bow to the Saudi king.
From the Daily Pickens on Oct. 20:
Arab Sheiks Need – And Want – Higher Oil Prices
As U.S. oil and gas production numbers continue to climb, oil prices have leveled off. In fact, for the first time in three years, some American consumers are seeing the price of gasoline at the pump dip below $3 a gallon.
And that’s got Arab sheiks worried.
According to The New York Times – and T. Boone Pickens – the social commitments of the monarchies in the Persian Gulf require hundreds of billions of dollars each year. But lower oil prices and diminishing reserves are making that increasingly difficult, especially for the Kingdom of Saudi Arabia:
Thus, on top of declining oil reserves, rapidly rising domestic energy consumption and increasing energy-supply diversification among its allies, the kingdom’s spiraling spending is also fast raising the break-even oil price for Saudi Arabia and all five of the other Gulf monarchies; in other words, the price of a barrel of oil that these states need in order to balance their books is getting higher and higher. In Bahrain it’s now over $115 (far higher than yesterday’s price of around $102) while in Oman it’s up to $104.
There is no easy short-term fix for this drain on the Saudi treasury.
Moreover, spending for stability’s sake in Saudi Arabia and the other Gulf monarchies will necessarily be quite short-lived. The kingdom pledged a record-breaking $500 billion for “welfare” this year — most to be spent on social security subsidies and new public sector jobs.
Such vast wealth distribution can’t be kept going for much longer. That level of public expenditure is not sustainable and it flies in the face of decades of efforts to promote better fiscal accountability in the kingdom and wean the population off handouts and public-sector entitlement.