May 28, 2015

The Impact of the Restructuring of the Oil Sector in Saudi Arabia

by Jean-Fran├žois Seznec

Saudi Arabia is the largest exporter of oil in the world, one of only three producers able to sustain production around 10 million barrels per day (b/d) and the only oil producer that can increase production by 2 million b/d rapidly. Accordingly, and in great part based on this ability to flood or starve oil markets, the kingdom has had a strong influence on the price of oil for the past 40 years. It is in this sense that any change in management structure and overall control of the energy industry in Saudi Arabia is not only closely followed, but also affects prices of energy worldwide.

Since King Salman bin Abdulaziz took the throne after the death of his half brother Abdullah in January, there have been many important changes in government and economic structure, most notably in the oil sector. While many of the bureaucratic changes have been widely assessed, it is the changes in the oil sector that have puzzled even seasoned observers, rendering the deciphering of oil policy in the kingdom even more difficult than the historical norm.