The Fall of The House of Saud 3
Saudi Arabia’s relationship to the world’s economy.
The economy of Saudi Arabia is strongly dependent on oil. It prides itself to have the largest
economy in the Arab world. Saudi Arabia is the world largest exporter of petroleum and has the
second largest exporter of petroleum reserves, with the fifth largest known proven gas reserves
for a long period of time, Saudi Arabia wanted to be part of the World Trade Organization. This
was dependent on how much Saudi Arabia was willing to open up its market to goods and
services from other nations. In view of the above, the Saudi government formed the Saudi
Arabian General Investment Authority with the sole mandate of persuading foreign direct
investment into the kingdom. In November 2005, Saudi Arabia was approved to enter the World
Trade Organization and became a full member on 11
December 2005.This was after opening up
sectors such as insurance, telecommunication and power transmission.
Saudi Arabia is also a founding member of the organization of the Petroleum Exporting
Countries (OPEC) which controls about 44% of the world oil production. This has had negative
effect on the world’s economy since OPEC has a major influence on global oil prices. Before
OPEC was established, the world oil prices were determined by American dominated
multinational oil companies.
Saudi Arabia long term oil pricing policy has been to ensure that the global oil prices continue
being stable. This ensures moderation of prices meaning not selling at high prices this may lead
to an increase in the demand of alternative sources of energy and high enough to maximize on
revenue. Stabilization prices is beneficial to Saudi Arabia since the economy of western
countries where most of its financial assets are situated will not be compromised and
considering that the same countries do provide the kingdom politically and offer military