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Comment by bulgr0z | Hacker News Reader

> No Arab oil producer, save tiny Qatar, can balance its books at the current price, around $40 (see chart).

This is pretty much an open secret for anyone following the price of oil, but how can Aramco still brag about producing for less than $10 [1] a barrel while the kingdom is openly hurting from the current prices ?

[1] https://www.forbes.com/sites/christopherhelman/2020/03/16/oi...

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The cost of production and the price level required to balance the government's budget are two different things.

Correct, to further explain the difference. The budget is drawn with a certain assumption of the price of oil, which nets them an expected profit per barrel with which they can balance income and expenses. If the price of oil is lower than that they may still make a profit per barrel but the budget is not balanced anymore and they will run deficits.

This is why higher oil prices seem to correlate with military adventures.

Just taking Saudi as an example, the oil is owned by the Royal Family, who then use the proceeds to pay for basically all government expenditures (taxes are very low in SA – for example there is no income tax).

When the price is below $40/barrel, they can no longer pay for these services effectively, which obviously causes immediate problems, but in the long term will make it harder and harder for the Sauds to maintain control of an ever-more-disgruntled populace.

I feel like this was made pretty clear in the article.

From what I recall reading on previous threads here, their production prices are that low but the country itself requires much higher prices to balance the books.

Technically SA wouldn't be the only country in the area to be able to produce a bbl under $40, but as you and others have echoed, that's not the whole story.

The problem for Saudi's is not the oil price but the expenses.

34 million people and huge subsidies for their citizens to keep Saudi Arabia politically stable.

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