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Saudi Arabia Considers Cutting Domestic Oil Subsidies
This week, Saudi Arabia's oil minister said the country may raise domestic energy prices. In an interview with reporters in Riyadh, minister Ali al-Naimi said the government was considering cutting subsidies on domestic energy. Currently, consumers enjoy very low fuel prices, with a gallon of regular gasoline costing around 46 cents, according to the Wall Street Journal. In total, Saudi Arabia spends an estimated $86 billion per year to subsidize oil products. Roughly one quarter of the Saudi Kingdom's oil is consumed domestically.
However, these subsidies are contributing to the economic woes in Saudi Arabia. Currently, the International Monetary Fund says Saudi Arabia is running a $150 billion deficit for 2015. Economic growth is predicted to be 3.5 percent for this year, but the IMF predicts that growth will slow in 2016. Many are closely watching Saudi Arabia to see what it will do. The kingdom effectively leads the Organization of the Petroleum Exporting Countries and, despite lower global demand, has only ramped up crude oil production-as many as 10 million barrels a day this year. Other OPEC countries have already cut domestic subsidies in response to economic pressures.
Regional Economic Outlook: Middle East and Central Asia (imf.org)
"Global growth remains moderate and uneven."
Saudi Arabia to run out of cash in less than 5 years (money.cnn.com)
"If oil stays around $50 a barrel, most countries in the region will run out of cash in five years or less, warned a dire report from the International Monetary Fund this week."
Oil prices keep plummeting as OPEC starts a price war with the US (vox.com)
"Oil prices have been dropping sharply over the past three months - a huge energy story with major repercussions for dozens of countries, from the United States to Russia to Iran."