A Saudi government overhaul which saw the dismissal of the long-time Saudi oil minister signals quite a lot—from the kingdom’s new economic ‘’vision’’ to the fallout from the global oil price crisis.
Ali al-Naimi was replaced after serving as an oil minister for 20 years and earning himself the reputation as the most formidable figure in the industry.
He will be replaced by Khaled al-Falih, a former Health minister, who also spent 30 years working for the state-owned Saudi Aramco, largely as chairman of the oil conglomerate.
Al-Naimi’s removal comes as Saudi Arabia has embarked upon major economic reforms aimed at curbing the country’s dependence on oil whose lowest prices in a decade has inflicted massive financial losses. Related: Self-Driving Vehicles May Be Closer Than You Think
The former oil minister was known for his firm position of maintaining the output levels following the advent of the U.S. shale boom, which finally led to a global supply glut and which ultimately a major price slump which has turned the industry on its head.
As it turns out, however, Al-Naimi’s game plan was not necessarily to the liking of the royal House of Saud, and particularly Prince Mohammed, the son of King Salman and the overseer of the kingdom’s economic policy.
Al-Falih will take over a ministry which will merge energy, industry and mineral resources department. Related: As Oil Markets Tighten, Geopolitical Events Matter Again
Almost three quarters of Saudi Arabia’s revenues come from oil and, as prices slid more than 30 percent last year alone, the country’s budget deficit in 2015 amounted to $98 billion, the widest since 1991. That figure led to an 80% increase of petrol prices across the country.
The economic reforms eyed by the Saudi government include a 5 percent sale of Saudi Aramco which Prince Bin Salman says is worth as much as $2.5 trillion. The large funds raised through the listing will be sunk into a sovereign wealth fund designed to stimulate fresh economic avenues for the nation.
Oil prices were up early on Monday on the Saudi news, which some might feel could herald a change in the production level, but also due to the oil put offline by the Canadian wildfires. But fell back over one percent as traders showed themselves concerned about the overnight crash in Chinese commodity markets.
By Charles Kennedy of Oilprice.com
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