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Consequences of Domestic Oil Consumption in Ksa

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Submitted By MKIMKI
Words 3930
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“In one generation we went from riding camels to driving Cadillacs. The way we are spending money today, I fear we will soon be riding camels again.” King Faisal (1904-1975)
Introduction

Energy, especially crude oil is one of the most valuable commodities in today’s international trade, an indispensable source primarily for transportation and industrial production. This makes oil prices one of the most important elements of today’s economy. In that sense, the Kingdom of Saudi Arabia is on the centre of world economy because of her rich reserves also because the Kingdom has the lowest production cost in the world. Saudi production capacity and the Kingdom’s political stability are key elements for the international oil prices and consequently the world economy.

Saudi Arabia is essential to the international oil market also, because she is the swing producer, meaning that she has the ability to affect the price by changing the supply and the other producers’ behaviours. Saudi Arabia is given an example par excellence for the leader in an oligopolistic market by Bhattacharya as the country holds an important market share, Saudi Aramco figures state that Saudi Arabia has 260 billion of oil, which accounts near one fourth of the known reserves, also high flexibility in capacity utilization, low financing requirement thanks to the low cost and it is negligible sensitivity to the changes in the market.

Rising world oil prices and Saudi Arabia's capability to quickly respond to the market demand by increasing its output levels in times of the crises. Most recently, Saudi cover supply shortages, as regime change in Libya, during the Arab Uprisings and continued sanctions imposed to Iran proved the Kingdom's importance as a supplier in the international market. The country produced nearly 8.2mbd in 2010 and in 2012, in a more instable oil market and more severe

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