SAUDI Arabia will raise domestic petrol prices by up to 40 per cent, AFP has reported, citing the kingdom’s state press agency, SPA.
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If the reports turn out to be true, this can possibly result in an increase in oil prices in India also.
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Next year’s budget suggests Saudi Arabia is basing its revenue on a price of $26 a barrel for export crude, if production remains at 10.2 million barrels per day, said Fahad Alturki, chief economist and head of research at Saudi-based Jadwa Investment.
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Next year’s budget projects spending of 840 billion riyals, down from 975 billion spent this year.
The Saudi government has been digging into its large foreign reserves to cover the difference between its spending and revenue over the past year. The government recorded a budget deficit of 367 billion riyals ($98 billion) in 2015.
However, oil prices have fallen by more than 50% since the middle of previous year, crimping the government’s spending.
“The kingdom reduced its dependency rate on oil revenues in 2015 and it will do the same in 2016 to overcome any negative impact from the decline in oil prices”, Sfakianakis said.
The government attributed the majority of the deficit in this year’s budget to the bonus to government employees ordered by King Salman after ascending the throne.
The revisions include raising the price of 91 octane gasoline to 0.75 riyals a litre from 0.45 riyals and increasing the price of 95 octane gasoline to 0.90 riyals from 0.60 riyals.
The new 2016 budget implies that the Kingdom of Saudi Arabia is not looking for any major oil price recovery, and it may even be banking on cheap oil being here for quite some time.
The dive is largely due to Saudi Arabia’s own policies and those of other nations part of the Organisation of the Petroleum Exporting Countries (OPEC), who are refusing to cut oil production as they seek to drive less competitive players, including U.S. shale producers, out of the market.
The country’s finance ministry said the deficit is considered an acceptable figure under the current circumstances. The IMF said the kingdom needs to sell oil at around $106 a barrel to balance its budget. Non-oil revenue climbed 29 per cent to 163.5 billion riyals.
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A large, unexpected spending contingency arose beginning in March 2015, when Saudi Arabia embroiled itself in an expensive military intervention in neighboring Yemen, the Arab world’s poorest country, against members of a non-Sunni tribe, the Houthi, which had launched a successful rebellion against Yemen’s contested government.
