Current Economic Issues Facing Saudi Arabia
Saudi Arabia is a developing country in the Arabian Gulf region that has been growing dramatically over the past two decades. Saudi Arabia's 2011 population has grown tremendously and is estimated to now be about 26.1 million, including about 5.6 million resident foreigners. Until the 1960s, most of the population was nomadic or semi-nomadic but now due to rapid economic and urban growth, more than 95% of the population is settled now.
Out of that 26 million people in Saudi Arabia, is has been found that the annual per capita income is anywhere from $11,500 to 24,500. This sounds kind of ridiculous because the country is known to the world to ...view middle of the document...
However, this figure is misleading. A large proportion of GNP is channeled towards the leaders while a disproportionate sum is filtered to the citizens. A large amount of construction was initiated using the revenues earned.
However, most of the workforce consisted of cheap foreign labor while the Saudi Arabian citizens suffer an enormous 25% unemployment rate compared to the United States 5% unemployment. This economic success dropped somewhat as oil prices dropped tremendously in 1998-1999. Large amounts of construction work were halted and social programs were cut to reduce costs.
However, since late 1999, the oil producers cartel agreed to lower the production rate of oil so that the price of oil would rise. Their move was very successful and oil rose from US$10 per barrel US$31 per barrel. Recently, at a meeting of the oil cartel, the rate of production was increased in order to reduce the price of oil to a stable level (US$25 per barrel) and satisfy the western world-- this shows the politics of oil.
The fact of the matter is that oil was only discovered in Saudi Arabia by U.S. geologists in the 1930s, although large-scale production did not begin until after World War II. Oil wealth has made possible rapid economic development, which began in earnest in the 1960s and accelerated spectacularly in the 1970s, transforming the kingdom. Saudi oil reserves are the 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 are estimated to be 263 billion barrels, 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. 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 Gulf terminals at Ras Tanura and Ju'aymah. The remaining oil exports are transported via the east-west pipeline across the kingdom to the Red Sea port of Yanbu. 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 per day (b/d) during 1980-81, dropped to about 2 million b/d in 1985. Budgetary deficits developed, and the government drew down...