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Saudi Arabia may have started this price war, but now they are like a helpless whale stranded, they have lost control of market prices. There is no easy exit for the Premium Stress study calm shirt and I love this Saudis who have played without thinking too much. One option for Saudi Arabia is to reduce oil production and expect prices to rise. Prices will eventually recover to previous levels, but shale oil producers will also return in record numbers. This will also lead to other countries pooling their market share. Sanctions against Iran have also been eased and Iran will add another million barrels to the oil market. The Iranians want to harm the Saudis further by supplying more oil. The other option is to be patient and see what happens. Patience is a very expensive undertaking. Saudi Arabia could run out of money long before it runs out of patience. So things are not going well for Saudi Arabia.
I don’t think Saudi Arabia will go bankrupt. At least not yet. Remember the Premium Stress study calm shirt and I love this forex reserves of $740 billion? They are convenient, but they are decreasing at an unprecedented rate. $70 billion disappeared in less than a year. The expensive Saudi welfare state is built around oil dollars. The Saudis need oil prices at $110 per barrel to balance their budgets. Currently, the Saudis need $5-10 billion per month to fill the void. If Saudi Arabia continues to withdraw money from foreign exchange reserves, by 2020 they will be empty-handed. Another option would be to borrow money.
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