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Saudi Overhaul Leaves Crude Oil Policy Intact
May 9, 2016
Source: Gulf News
The new energy minister pledged continuity in the kingdom’s oil policy
“Saudi Arabia will maintain its stable petroleum policies,” Khalid Al Falih said in a statement.
“We remain committed to maintaining our role in international energy markets and strengthening our position as the world’s most reliable supplier of energy,” Falih added.In a cabinet reshuffle on Saturday, King Salman of Saudi Arabia appointed Khalid Al Falih as the new minister of energy, industry and mineral resources.
The new changes take place as oil prices plunge and Saudi Arabia’s influence in controlling oil markets wane due to increased oil production from the US and Russia.
“I don’t expect the kingdom to cut its oil production at some point soon or by the June Opec meeting. The kingdom will not give up its market share to its rivals either Iran or Russia, or the US shale oil,” Sara Vakhshouri, President of SVB Energy International based in Washington told Gulf News by email.
The next Opec meeting will take place on June 2 in Vienna. For the first time in the last twenty Al Nuaimi will not be representing Saudi Arabia at the meet. The new oil minister Al Falih is expected to attend the important gathering of oil ministers of thirteen member countries
On the new oil minister, Sara said Saudi Arabia followed its traditional trend of appointing a technical person as the Minister of Petroleum and head of Saudi Aramco, rather than just choosing a member of the royal family to pursue this job.
“Khalid Al Falih has a technical petroleum background and education and has more than three decades of experience working in the energy industry and Saudi Aramco,” she said about the new oil minister.
Energy and Economic Policy
Falih is from the Saudi province of Dammam and is a graduate of Texas A&M University. He was appointed as president and chief executive officer of Saudi Aramco in January 2009.
“The replacement of the Saudi Oil minister (Al Nuaimi) was expected and was not shocking to us especially at the time that the Deputy Crown Prince is getting ready to shake up the Kingdom’s energy and economic policy,” she said on the sacking of Al Nuaimi.
Dr Mamdouh G Salameh, an international oil economist was critical of Al Naimi and said the policy of not cutting oil production was a failure.
“The current Saudi oil strategy has very adversely harmed the Saudi economy and the Saudi currency which is now under pressure with a real possibility that it could be devalued or floated. Saudi Arabia could prove to be the biggest casualty of the collapse of the oil price,” he said.
He said the policy he followed by flooding the global oil market with oil had been tried before by the former Saudi oil minister Shaikh Ahmad Zaki Yamani in the early 1980s and found wanting.
“Why follow such a defunct policy then?,” he asked.
Opec, led by Saudi Arabia, stuck to the position of not slashing output at its meeting in Vienna last year putting pressure on oil prices, which dropped further. Brent, the international benchmark was trading at $45.37 per barrel on Sunday.
