Such was the price to be paid for King Abdullah’s economic war on America’s oil independence from shale before he passed away. The Saudi-friendly IEA has said America will never take the crown from Saudi Arabia whereas a Saudi prince has mentioned oil will never see under $100 per barrel ever again. The baton has now been passed to King Salman and he will be continuing the attack for an indefinite duration.
In the end, it was a matter of who had more asset reserves: American oil companies or the Saudi coffers built on decades of exports.
In this game of economic chicken it looks like the American oil companies who are already down to the “bare bones” might be the first to blink, however, total destruction on both sides shouldn’t be dismissed.
Estimate based on current fiscal policies amid oil’s slump
Saudi authorities are already planning spending cuts
Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to shore up public finances amid the drop in oil prices.
The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said. Continue reading