Will Saudi Arabia become like today's Venezuela in three years if oil prices stay low?
I would doubt that being the case. There are interesting differences between KSA and Venezuela.Lets start with Crude Oil, which serves as the backbone of both nations economy. While Venezuela boasts of higher reserves, you have to understand that a good majority of that is Heavy Crude Oil. It costs Venezuela $28/barrel on average to produce oil in comparison to $9 for the Saudis.{1} Saudis Aramco produces around 10.5m Barrels oil/day whereas its counterpart PDVSA only produces 2.2m. {2} Further the majority of Saudi Crude Oil Exports today lands in Asia (China, Japan, ROK, India etc.) wherein there is a slight premium over Brent Crude Price. Now that we have the basics of Oil taken care of, lets move over to Cash Reserves and Fiscal Situation.As of 2024. Saudi still holds a little over $700Bn in its Central Bank (SAMA) holdings and Sovereign Investment Fund (PIF, KSA) whereas its Counterpart FEM has a paltry .8Bn. Next, we should consider how they fare when it comes to National Government Debt, wherein KSA had $84 Bn (SAR 316.5 Bn ) {4} in relation to $150Bn owed by the Venezuelans. {5}. Considering the fact that the Venezuelan Government has already declared insolvency, its Fiscal comparison to Saudi Arabia is highly unfair. Looking at their national budgets, KSA has it at $261B for 2024 while Venezuela at a mere $8bn (Real Market Rate). Can you see the difference now? The gap is immense. Now coming over to Import/Export Data, we see that Venezuela only exported $34.3Bn worth of commodities while Saudi Arabia was at $182Bn.{6}{7}I donāt mean to hoodwink anyone by portraying that all is good and rosy in KSA as of the moment. Their leading firms such as Saudi Oger have shut down, while Saudi Binladen Group have been forced to restructure. Things arenāt rosy in the Kingdom either, itās just that they are acutely aware of it and are making amends to rectify it. Immense labor law changes have come to place, with a push towards larger domestic workforce participation. As many as 100k students have been sponsored to study at Universities in the US alone in the past decade. Cities such as Jubail and Yanbu have been setup in the past decades to prop up Petro-Chemical Industries. Further, industries such as Food Processing and Manufacuring Assembly of products such as HVAC systems (For Example, Zamil AC) and Heavy Duty Trucks (Zahid Tractors - Renault) {8} have been setup. Change is slow, but coming! Unfortunately the same canāt be said of Venezuela, where it seems that officials under the guise of Socialism and Welfare have siphoned off Billions from the Treasury in order to self-benefit. Even the GM Assembly Plant has now been shut off! Saudis on the other hand are a form of Welfare Economy with a Capitalistic tinge. While many may not recognize Saudi as a traditional tourist hotspot , it plays host to over 8 million religious tourist for pilgrimage from around the world. That brings in considerable foreign exchange too!Lastly, I donāt think KSA is a 100% immune from going broke, rather just that itās gonna take more than just a few years of low oil prices. On the other hands other Gulf Countries such as Kuwait, UAE and Qatar have reached reserves of such magnitude (600Bn+, 1300Bn+, 350Bn+ respectively), that they really are well and good even without oil. Just take the example of UAE, which even with a paltry 3% ROI on their funds, can easily generate $40Bn every year. This is more than enough to power a citizen population of 1.1m.On a different note, while both countries, hosts roughly 32 million residents, Saudi Arabia (A 700bn G-20 Economy) hosts a higher share of alien expats (11m), yielding a citizen population of 21m. This allows them to easily diversify their workforce and continue hosting cheap labor from South & South East Asia.{1} Barrel Breakdown{2}Pg 17 of OPEC Annual Report http://www.opec.org/opec_web/sta...{3} SWFI - Sovereign Wealth Fund Institute{4} Saudi Arabia's national debt has exploded since the oil crash{5} China says Venezuela can 'appropriately' handle debt load{6}Venezuela (VEN) Exports, Imports, and Trade Partners{7} Saudi Arabia (SAU) Exports, Imports, and Trade Partners{8} First Saudi-built Renault trucks roll off assembly line