This document from the U.S. Library of Congress gives an overview of the economy of Saudi Arabia. It provides a timeline of the oil industry in Saudi Arabia and an explanation of the strong position the kingdom has in the global oil market.
The discovery of oil in Saudi Arabia has dramatically transformed the country on many levels. In the years before the 1930s, people in the region where depending on various economical activities. For example, the western province “Hijaz” was dependent on agriculture, trade, and religious tourism due to the existence of the two Islamic holy sites, Makkah and Medina, their. Another provinces like the eastern province had a mainly plantation economy and was dependent on cash crops like dates. With no doubt, oil played as a unification tool that encouraged urbanization and formed a large but closer communities. For many decades before oil, the people were considered hostile and separated from each-other; due to the requirements of the nomadic lifestyle that does not encourage permanent habitation on one place; as people were in constant looking for water sources.Three major events could describe the contemporary image of Saudi Arabia. First, the establishment of the kingdom in 1932. Second, the discovery of oil in the eastern province in 1938. Third, the high need for the cheap Saudi Arabian oil in the aftermath of the second world war in order for the European countries to rebuild their destroyed infrastructures.The Saudi Arabian oil industry flourished as a result and it later became a necessity to sustain the international economic stability. The importance of the Saudi oil is easily understandable from the intervention of the U.S in the 1991 Persian gulf war; in order to protect its favorite oil provider in the world. Further more, Saudi Arabia as one of the largest oil producing countries has a strong influence on the international oil prices; and its current strategies to secure its economy among the Organization of the Petroleum Exporting Countries (OPEC) is expected to damaged many of the smaller oil producing countries in both the short and the long run.
In the recent few years, we could see the global oil prices and demand experiencing many fluctuations; which I expected would seriously affect the country if it continued its heavy reliance on oil.Thankfully, the the government is starting to understand the importance of economic diversification and is trying to get rid of the “curse of oil” before it’s too late. I have always heard local economists promoting the idea of diversifying the economy but I have not felt its importance until recently. I am looking forward to see an implementation of their suggestions on the ground, not on papers only.
This article from the economist magazine takes about the predicted fate of oil. It was published in 2003 but it is really relevant to the current situation. The article highlights the former Saudi oil minister predictions about the end of the Oil Age. It also presents the possible global shift toward other energy sources.
“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” said Sheikh Ahmed Zaki Yamani, former Saudi Arabian oil minister. The article is saying that the dependency of the Middle East on oil revenue is somehow resulting from the dependency of the world on the Middle Eastern oil. When the other countries of the world is self sufficient in terms of energy sources, they would no longer see the necessity of importing oil from the Middle East, and the region would realize the bad situation it is stock in by solely depending on such source. Saudi Arabia, as the largest exporter of oil in the world, is particularly in a great risk due to the uncertainty regarding the fate of oil in the near future; as some countries are developing more sustainable energy sources, and others are producing oil localy.
In 2016, In order to protect itself against any further oil prices storm, the government has declared a developmental program called vision 2030. It basically explains the economic, political, and cultural reforms the authorities are considering in order to improve the economy. The vision emphasis the tendency of diversifying the economy, strengthening the private sector,and encouraging the foreign direct investment by removing the current barriers they might face.The instability of the oil market in addition to the event of the so called Arab spring are two factors that stimulated the government to think more about the political stability which starts from the economic stability as I think. A thing that I know about Saudi Arabia is it abundant mineral stocks like gold and zinc that are being partial ignored because they are not easy to extract. If the improving the mining industry became a priority of the government, this could open up tens of thousands of jobs and provide a new investment opportunities that should not be missed.