The economy of Saudi Arabia is the second-largest in the Middle East and the nineteenth-largest in the world. The Saudi economy is highly reliant on its petroleum sector. Oil accounts on average in recent years for approximately 40% of Saudi GDP and 75% of fiscal revenue, with substantial fluctuations depending on oil prices each year.
The Organization of the Petroleum Exporting Countries is an organization enabling the co-operation of leading oil-producing countries in order to collectively influence the global oil market and maximize profit. It was founded on 14 September 1960 in Baghdad by the first five members. The organization, which currently comprises 12 member countries, accounted for an estimated 30 percent of global oil production. A 2022 report further details that OPEC member countries were responsible for approximately 38 percent of it. Additionally, it is estimated that 79.5 percent of the world's proven oil reserves are located within OPEC nations, with the Middle East alone accounting for 67.2 percent of OPEC's total reserves.
A multinational corporation is a corporate organization that owns and controls the production of goods or services in at least one country other than its home country. Control is considered an important aspect of an MNC to distinguish it from international portfolio investment organizations, such as some international mutual funds that invest in corporations abroad simply to diversify financial risks. Black's Law Dictionary suggests that a company or group should be considered a multinational corporation "if it derives 25% or more of its revenue from out-of-home-country operations".
In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) announced that it was implementing a total oil embargo against the countries who had supported Israel at any point during the Fourth Arab–Israeli War, which began after Egypt and Syria launched a large-scale surprise attack in an ultimately unsuccessful attempt to recover the territories that they had lost to Israel during the Third Arab–Israeli War. In an effort that was led by Faisal of Saudi Arabia, the initial countries that OAPEC targeted were Canada, Japan, the Netherlands, the United Kingdom, and the United States. This list was later expanded to include Portugal, Rhodesia, and South Africa. In March 1974, OAPEC lifted the embargo, but the price of oil had risen by nearly 300%: from US$3 per barrel ($19/m3) to nearly US$12 per barrel ($75/m3) globally. Prices in the United States were significantly higher than the global average. After it was implemented, the embargo caused an oil crisis, or "shock", with many short- and long-term effects on the global economy as well as on global politics. The 1973 embargo later came to be referred to as the "first oil shock" vis-à-vis the "second oil shock" that was the 1979 oil crisis, brought upon by the Iranian Revolution.
Petrocurrency is a word used with three distinct meanings, often confused:
- Dollars paid to oil-producing nations —a term invented in the 1970s meaning trading surpluses of oil-producing nations.
- Currencies of oil-producing nations which tend to rise in value against other currencies when the price of oil rises.
- Pricing of oil in US dollars: currencies used as a unit of account to price oil in the international market.
Petrodollar recycling is the international spending or investment of a country's revenues from petroleum exports ("petrodollars"). It generally refers to the phenomenon of major petroleum-exporting states, mainly the OPEC members plus Russia and Norway, earning more money from the export of crude oil than they could efficiently invest in their own economies. The resulting global interdependencies and financial flows, from oil producers back to oil consumers, can reach a scale of hundreds of billions of US dollars per year – including a wide range of transactions in a variety of currencies, some pegged to the US dollar and some not. These flows are heavily influenced by government-level decisions regarding international investment and aid, with important consequences for both global finance and petroleum politics. The phenomenon is most pronounced during periods when the price of oil is historically high.
The Organization of Arab Petroleum Exporting Countries is a multi-governmental organization headquartered in Kuwait which coordinates energy policies among oil-producing Arab nations. OAPEC's primary objective is safeguarding the cooperation of numerous members in various aspects of economic activity within the oil industry as well as maintaining strong relations among themselves; to provide legitimate means to preserve the members' individual and collective efforts within the industry; unite on-going efforts for the procurement of oil; provide access to consumer markets on fair and reasonable terms; and provide conditions, adequate capital, and experience of investors in the oil industry.
Ahmed Zaki Yamani was a Saudi Arabian politician who served as Minister of Petroleum and Mineral Resources under four Saudi monarchs from 1962 to 1986, and a minister in the Organization of the Petroleum Exporting Countries (OPEC) for 25 years.
The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Reference Basket, Tapis crude, Bonny Light, Urals oil, Isthmus, and Western Canadian Select (WCS). Oil prices are determined by global supply and demand, rather than any country's domestic production level.
For further details see the "Energy crisis" series by Facts on File.
Big Oil is a name sometimes used to describe the world's six or seven largest publicly traded and investor-owned oil and gas companies, also known as supermajors. The term, particularly in the United States, emphasizes their economic power and influence on politics. Big Oil is often associated with the fossil fuels lobby and also used to refer to the industry as a whole in a pejorative or derogatory manner.
Russia's energy policy is presented in the government's Energy Strategy document, first approved in 2000, which sets out the government's policy to 2020. The Energy Strategy outlines several key priorities: increased energy efficiency, reducing the impact on the environment, sustainable development, energy development and technological development, as well as improved effectiveness and competitiveness. Russia's greenhouse gas emissions are large because of its energy policy. Russia is rich in natural energy resources and is one of the world's energy superpowers. Russia is the world's leading net energy exporter, and was a major supplier to the European Union until the Russian invasion of Ukraine. Russia has signed and ratified the Kyoto Protocol and Paris Agreement. Numerous scholars posit that Russia uses its energy exports as a foreign policy instrument towards other countries.
Juan Pablo Pérez Alfonzo, was a prominent Venezuelan diplomat, politician and lawyer primarily responsible for the inception and creation of OPEC, along with Saudi Arabian minister Abdullah Tariki.
The nationalization of oil supplies refers to the process of confiscation of oil production operations and their property, generally for the purpose of obtaining more revenue from oil for the governments of oil-producing countries. This process, which should not be confused with restrictions on crude oil exports, represents a significant turning point in the development of oil policy. Nationalization eliminates private business operations—in which private international companies control oil resources within oil-producing countries—and transfers them to the ownership of the governments of those countries. Once these countries become the sole owners of these resources, they have to decide how to maximize the net present value of their known stock of oil in the ground. Several key implications can be observed as a result of oil nationalization. "On the home front, national oil companies are often torn between national expectations that they should 'carry the flag' and their own ambitions for commercial success, which might mean a degree of emancipation from the confines of a national agenda."
The 1980s oil glut was a significant surplus of crude oil caused by falling demand following the 1970s energy crisis. The world price of oil had peaked in 1980 at over US$35 per barrel ; it fell in 1986 from $27 to below $10. The glut began in the early 1980s as a result of slowed economic activity in industrial countries due to the crises of the 1970s, especially in 1973 and 1979, and the energy conservation spurred by high fuel prices. The inflation-adjusted real 2004 dollar value of oil fell from an average of $78.2 in 1981 to an average of $26.8 per barrel in 1986.
The 1970s energy crisis occurred when the Western world, particularly the United States, Canada, Western Europe, Australia, and New Zealand, faced substantial petroleum shortages as well as elevated prices. The two worst crises of this period were the 1973 oil crisis and the 1979 energy crisis, when, respectively, the Yom Kippur War and the Iranian Revolution triggered interruptions in Middle Eastern oil exports.
The No Oil Producing and Exporting Cartels Act (NOPEC) was a U.S. Congressional bill, never enacted, known as H.R. 2264 (in 2007) and then as part of H.R. 6074 (in 2008). NOPEC was designed to remove the state immunity shield and to allow the international oil cartel, OPEC, and its national oil companies to be sued under U.S. antitrust law for anti-competitive attempts to limit the world's supply of petroleum and the consequent impact on oil prices. Despite popular sentiment against OPEC, legislative proposals to limit the organization's sovereign immunity have so far been unsuccessful. "Varied forms of a NOPEC bill have been introduced some 16 times since 2000, only to be vehemently resisted by the oil industry and its allied oil interests like the American Petroleum Institute and their legion of 'K' Street Lobbyists."
The 2010s oil glut was a significant surplus of crude oil that started in 2014–2015 and accelerated in 2016, with multiple causes. They include general oversupply as unconventional US and Canadian tight oil production reached critical volumes, geopolitical rivalries among oil-producing nations, falling demand across commodities markets due to the deceleration of the Chinese economy, and possible restraint of long-term demand as environmental policy promotes fuel efficiency and steers an increasing share of energy consumption away from fossil fuels.
On 8 March 2020, Saudi Arabia initiated a price war on oil with Russia, which facilitated a 65% quarterly fall in the price of oil. The price war was triggered by a break-up in dialogue between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over proposed oil-production cuts in the midst of the COVID-19 pandemic. Russia walked out of the agreement, leading to the fall of the OPEC+ alliance.
