Will Saudi Arabia run out of money? : “they talk the talk, but can they walk the walk?”
Master thesis
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http://hdl.handle.net/11250/2382969Utgivelsesdato
2015Metadata
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- Master Thesis [4490]
Sammendrag
We examine when and if Saudi Arabia run out of money in order to predict if Saudi Arabia
will change their oil policy due to the low oil price we are facing today. This is done by
running different static analyses, time series analysis and an analysis on the effects of cutting
production based on elasticity of supply.
We find that Saudi Arabia run out of money if they continue without financial and strategic
adjustments. However, our findings show that other analysts overestimate when Saudi
Arabia run out of money, since they do not account for return on their foreign reserves.
Furthermore, we find that Saudi Arabia will decrease the possibility of running out of money
as long as they introduce a stricter budget policy. Lastly, we find that Saudi Arabia has
something to gain from reducing their production. However, exclusively focusing on
production cuts will not solve the initial problem with running out of money. Therefore, we
find that Saudi Arabia will have their primary focus on adjusting expenditures, and
production cuts will only be used as a secondary measure.
We conclude that Saudi Arabia will not run out of money as they will adjust their
expenditures and tighten their budget policies. We also believe that Saudi Arabia will try to
delay the usage of production cuts as long as possible. Our findings indicate that the oversupply
of oil will continue and that we will observe a persisting low oil price.