Bahrain and Yemen aside, the turmoil in the Middle East has turned into a boon for Saudi Arabia, as the country’s coffers swell with the proceeds of climbing oil prices and production. And, a series of subsidies and other measures worth as much as $xx billion will help ensure the bounty reaches ordinary Saudis.
National Commercial Bank, a Saudi lender, raised its outlook this week to 5.1% from a previous 4%. Barclays Capital is planning to revise its forecasts shortly as is Bank of America. A Reuters poll of economists taken last week before the second of two government spending plans was unveiled showed the Saudi economy growing by 4.5% this year, slightly faster than previous expected.
As supplies from Libya have fallen and worries that other exporters may cut output as well, oil prices have risen about 20% this year. Benchmark Brent crude for May delivery traded at about $115 for a barrel on Thursday. Economists estimate that for every $10 increase in the price, Saudi Arabia can increase its budget by 6% of gross domestic product.
And, with the world’s biggest reserves and excess capacity, Saudi Arabia is benefitting twice over by raising output to fill the Libyan gap. Official figures aren’t available, but the country is believed to have boosted output by about 700,000 barrels a day to 9.2 million barrels.
“On the oil side, recent events have been unambiguously positive,” Daniel Kaye, senior economist for National Bank of Kuwait, told The Media Line.
Middle East Is World’s Riskiest Region for Water Security, Study Says
The Middle East and North Africa have the world’s least secure water supplies, a danger that heightens political risk in an already volatile region and may even lead to higher oil prices in the future, according to a study released on Tuesday.
The Water Risk Index, developed by the British risk consultants Maplecroft, found that out of 18 countries around the world at “extreme risk” to their water security, 15 are in the Middle East. The list numbers several key oil exporters, including Saudi Arabia, Kuwait, the United Arab Emirates, Libya and Algeria, whose water woes could have global implications.
The turmoil raging across the Middle East has been ascribed to a host of political and economic problems, among them inflation fanned by rising food and energy prices. Water hasn’t factored into the unrest, but experts have warned that the region’s lack of water, poor management and disputes over sharing resources may emerge as a new source of instability.
For business people and investors, water security should factor into their strategy, Maplecroft analyst Tom Styles said. Aside from political risk, water shortages are likely to prompt governments to regulate consumption more severely and raise costs, which could hurt industries reliant on water.
Companies also must be cognizant of “reputation risk” if their facilities are seen by the public as using too much water or degrading its quality,