Saudi Arabia is comfortable with the oil price of approximately $80, instead of the appropriate $100. Saudi Arabia is very influential in determining oil prices. This is despite new oil production in America and globally. The reduced oil prices can result in a budget deficit, and this will raise issues on the political stability of Saudi Arabia. However, economic analysts illustrate that the kingdom will adequately withstand the budget deficit, due to the great foreign exchange reserves. With the reduced rate of global economic growth, the reduced oil prices favor the weakening economies like China and Europe. These economies represent the biggest customers of Saudi’s products. Despite the shale boom, America is the greatest oil net importer. Lower global oil prices have negative outcomes for the shale production sector in America. One negative outcome is a reduction in capital spending, by the shale producers.
Geoff, Dyer. “Saudi Arabia tests US ties with oil price.” The Financial Times. October 16, 2014. Print.