Saudi Arabia's Essential Oil

Why Riyadh Isn't Worried About the U.S. Gas Revolution

Camels near electricity poles erected east of Riyadh, April 23, 2012. Fahad Shadeed / Courtesy Reuters

Last year, it was nearly impossible to miss headlines proclaiming the United States’ coming energy windfall. According to the U.S. International Energy Agency’s latest forecast, thanks to booming output from shale gas formations, the United States will be nearly energy self-sufficient by 2015, surpassing both Russia and Saudi Arabia in energy production. All this might seem like bad news for Saudi Arabia, which could see its regional and economic influence wane and its decades-long economic boom come to an end.

But the shale oil bonanza in the United States is actually a good thing for Riyadh. Over the last few decades, oil markets have experienced sharp price fluctuations, particularly with growing demand for oil in the emerging Asian economies. Oil is Saudi Arabia’s main source of revenue, so any price swings create big risks for the kingdom. Unpredictable oil prices and a collapse in revenues in the 1980s

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