Saudi billionaire Prince Alwaleed bin Talal warned in a letter to Saudi Oil Minister Ali al-Naimi and others that the U.S. boom of shale oil and gas will reduce its thirst for Saudi crude oil. “Our country is facing a threat with the continuation of its near-complete reliance on oil, especially as 92 percent of the budget for this year depends on oil,” he wrote. “It is necessary to diversify sources of revenue, establish a clear vision for that and start implementing it immediately.
Prince Alwaleed’s approach is insightful in so far as the observation that the Kingdom of Saudi Arabia must work to diversify its sources of revenue. The United States is focusing on higher domestic production of energy resources from other technologies. Their aim is to reduce energy dependency on oil-rich countries including Saudi Arabia.
If America manages to successfully de-hyphenate itself on a large scale from imported energy resources and relies on primarily on national production and outputs, this will result in significant cuts in oil-rich countries’ oil revenue. The price of oil may also decline in such a situation, as other industrialized countries are likely to follow the same path.
Right now is the right time for oil-rich countries to take preemptive action against such a situation and to work on diversifying their sources of revenue. GCC states must reevaluate their oil import strategy and mange it according to these changing scenarios. They must also get rid of the “Dutch Disease”, that is, “the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector”.