zerohedge.com / by Andy Tully via OilPrice.com / 12/30/2014 11:49The nearly 50 percent plunge in the price of oil during the past six months is expected to leave oil-rich Saudi Arabia with its first budget deficit since 2011 and the largest in its history.
The budget, announced on Dec. 25, will include spending during fiscal 2015 of $229.3 billion, higher than in 2014, despite revenues estimated at only $190.7 billion, lower than in the current fiscal year. That would leave a deficit of $38.6 billion.
Oil prices have been dropping since June because of a market glut, caused in part because of prodigious oil extraction in the United States from shale formations.
As a result of this glut, OPEC was urged to cut production levels at its Nov. 27 meeting in Vienna in an effort to shore up prices, but wealthy members of the cartel, led by Saudi Arabia, decided to keep production at its nearly two-year-old level of 30 million barrels a day.
Saudi Oil Minister Ali al-Naimi has since explained that the OPEC strategy was to reclaim market share. Fracking has made the United States, once the cartel’s largest customer, nearly self-sufficient in oil. But fracking is expensive, and many believe it can’t be profitable if the price of oil falls much below its current level of around $60 per barrel.
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