Prince Alwaleed bin Talal, the billionaire investor, chairman of Kingdom Holdings, and nephew of King Abdullah of Saudi Arabia, has been noted saying that his country's economic dependence on oil and the lack of alternative revenue streams makes it incredibly vulnerable to shocks in the oil market.
"The last Saudi government budget was recently announced and our dependence on oil was 92 percent. This proves that the government's previous economic plans haven't succeeded. It's dangerous that our income is 92 percent dependent on oil revenue alone. If the price of oil was to decline to US$78 a barrel there will be a gap in our budget and we will either have to borrow or tap our reserves. Saudi Arabia has SAR2.5 trillion in external reserves and unfortunately the return on this is 1 to 1.5 percent. We are still a nation that depends on the oil and this is wrong and dangerous," he said.
Saudi Arabia controls nearly one fifth of the world's proven oil reserves, and is currently the largest producer and exporter of petroleum products in the world, but Citigroup have written that the kingdom could easily become a net oil importer by 2030 if its oil consumption grows in line with current energy demand forecasts.
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In order to avoid this fate Saudi Arabia must develop alternative sources of energy generation, this will bother reduce their reliance on oil for energy, reducing their carbon emissions, but also free up more oil for exports.
Prince Alwaleed commented, "we've been talking about diversifying Saudi Arabia's revenue... for almost 30 years and not relying on oil. You know Eisenhower said plans have no value, implementation does." What the Saudi government needs to do is implement the plans to diversify that it has been working on for almost 30 years.
That is why, in an effort to diversify its energy mix, Saudi Arabia plans to invest $109 billion over the next 20 years on developing its solar sector, according to Alexander Lenz, president of Conergy Aisa & ME Pte. Ltd. in the Middle East and Southeast Asia.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com More