Saudi Arabia, the world’s biggest oil exporter, is now pumping at less than its production capacity because consumers are limiting their oil imports, Prince Alwaleed said. This means the kingdom is, “facing a threat with the continuation of its near-complete reliance on oil, especially as 92% of the budget for this year depends on oil,” said the prince.…In a report last month, OPEC’s own analysts predicted that demand for the group’s crude would fall next year to 29.6 million barrels a day, more than 600,000 barrels a day below its level last year. The International Energy Agency expects demand for OPEC crude to decline again in 2015 to 29.2 million barrels a day, before starting to rise gradually in the following years.
Still, the importance of Saudi oil to the US and to the world market is not diminishing. The Kingdom’s spare capacity and ability to increase exports in times of need (during periods of decreased supply from Iran and Libya, for example) helps keep the global oil market stable. Saudi oil has been consumers’ best shield against price shocks for a while now, and as long as we consume oil, no amount of cheap American gas can make that otherwise.But if you’re in the House of Saud, that’s not much comfort. There’s no denying that the Kingdom’s economy will suffer under decreased demand for petrochemical exports from its biggest customer—the US. American domestic production means a steep drop-off in demand for the $100 billion Gulf petrochemical industry, and if China masters the exploitation of its own shale reserves, the cracks in the Saudi economic model will grow wider still.Unless the Saudis do some economic rebalancing to cope with this sea change, they’re in for a rude awakening.[Image of desert oil tower courtesy of Shutterstock]