Saudi Arabia in the World Oil Market

DOI: 10.20542/0131-2227-2021-65-9-98-107
S. Zhukov (, 
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation;
I. Kopytin (, 
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation;
O. Reznikova (, 
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation

Received 30.03.2021.

Acknowledgements. The article was prepared within the project “Post-crisis world order: challenges and technologies, competition and cooperation” supported by the grant from Ministry of Science and Higher Education of the Russian Federation program for research projects in priority areas of scientific and technological development (Agreement 075-15-2020-783). 

Abstract. The goal of the article is to analyze the role of Saudi Arabia in the world oil market and in the world economy for a long historical period. It is shown that strategically behavior of Saudi Arabia always was and continues to be subordinated to ensuring the stable supply of oil into the world oil market. Under the Saudi Arabia leadership OPEC aims at pursuing an economically rational and responsible policy, supporting the balance of the demand for oil and its supply thus allow¬ing to avoid deep and lasting oil price decline. Until the very recently an important factor impacting the formulation of Saudi oil policy was maintaining of strategic interaction with the US. The restructuring of the world oil market driven by the shale revolution and nearing peak of global demand for oil have created new challenges for Saudi Arabia oil strategy. The OPEC+ situational agreement enacted since 2017 by OPEC and non-OPEC countries to voluntary reduce levels of oil production temporarily allows to keep a supply – demand balance in the world oil market preventing from substantial drop in oil prices. At the same time the agreement opens opportunities for competitors, first of all American producers of tight oil, to maintain and expand export niches. Shale revolution created a situation when oil interests of the US and Saudi Arabia came into open conflict. For political and strategic considerations, a price war in order to crowd American oil producers with their relatively high production costs out of the market is not a feasible option for the Kingdom. Attempts to transform the state oil company Saudi Aramco into a mega supermajor utilizing on the global economic and financial potential have failed as the leading international banks and corporations avoided the company’s IPO. The failure of Saudi Aramco partial privatization is a signal of a false start of a company to open the Saudi economy to large-scale in-flow of foreign investment. Paradoxically the long-term perspectives of Saudi Arabia crucially depend on how effectively it will use in the coming 10–20 years oil export earnings for diversification of national economy outside the oil sector. 

Keywords: world oil market, “shale revolution”, US, Saudi Arabia, OPEC, OPEC+, Saudi Aramco


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For citation:
Zhukov S., Kopytin I., Reznikova O. Saudi Arabia in the World Oil Market. World Eonomy and International Relations, 2021, vol. 65, no. 9, pp. 98-107.

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