Saudi to raise petrol prices by over 50%

According to Russia’s Energy Minister Aleksandr Novak, Saudi Arabia has destabilized the crude market by increasing its oil output to the tune of 1.5 million barrels a day.

Jadwa expected the Saudi government to announce a National Transformation Programme (NTP) in January to outline further plans to boost non-oil income.

The kingdom has seen a sharp drop in revenues as oil prices have fallen by more than 60 percent since mid-2014 to below $40 a barrel.

Oil prices slid in response to Monday’s statement, with the United States benchmark West Texas Intermediate losing $1.29 to $36.81 a barrel, while Brent crude shed $1.27 to $36.62 a barrel in London.

In the 2015 budget, oil revenues accounted for 72 percent of total revenue as opposed to 87 percent in 2014. This is 23 per cent less than oil revenue during the previous year.

The government announced its budget on Monday, projecting spending of $224 billion (840 billion riyals) in 2016 versus $137 billion (513 billion riyals) in revenue.

Spending this year rose by 13% more than analysts forecast and topped $260 billion (£174 billion), mainly because of the country’s war efforts in Yemen and its role in helping to fight ISIS (also known as the Islamic State, Daesh, or ISIL) troops in neighbouring states. Saudi Arabia normally overspends its budget projections by around 20 per cent.

Contracts used to bet whether Saudi Arabia will allow its dollar-pegged currency to weaken jumped to the highest level in more than 16 years after the world’s biggest oil exporter cut subsidies and spending for 2016.

Prices will also rise for other fuels including natural gas, diesel and kerosene and for heavily subsidised electricity and water, but details were not immediately available.

The people of Saudi Arabia will now be subjected to higher utility costs as subsidies will be removed to decrease expenses.

“The oil sector will be a drag especially with no expected increase in crude production”, NCB said in a note. Amongst the measures, the ministry will create a public finance unit that sets a budget ceiling.

It comes after the International Monetary Fund warned in October that Riyadh would run out of money within five years if it did not tighten its belt.

To finance the budget, the Saudi government withdrew from its huge fiscal reserves and issued bonds on the domestic market.