Sliding oil prices are a problem for Saudi Arabia and Neom Megaprojects

Saudi Arabia still depends strongly on petroleum income – and the collapse of oil prices in recent days is not good news for its Vision 2030 megaprojects.

A key element is the futuristic city Neom from the Red Sea, the line forming its centerpiece.

The kingdom finances these projects mainly from oil revenues. World oil prices were on average $ 81 in a barrel last year, according to the US Energy Information Administration, but collapsed in the middle of the agitation of the market launched by the trade rates of President Donald Trump.

Brent Crude, the international index, exchanged as low as $ 62 a barrel on Monday, while US oil became as low as $ 59 a barrel. This is the first time that WTI oil has been less than $ 60 since 2021.

Goldman Sachs has reduced his forecasts for next year, highlighting the increased risk of recession and the possible power of OPEC + nations higher than OPEC + nations. Bank analysts are now awaiting $ 58 a barrel for Brent and $ 55 for US oil.

The drop in oil prices means less income for Saudi Arabia – the largest oil exporter in the world. Tim Callen, a scholarship holder invited to the Institute of the Institute of Arab Gulf States in Washington, told Business Insider that this means that the kingdom must either “increase the income from non -oil sources – or reduce expenses”.

“My feeling is that there will be a reduction in plans with canceled priority projects canceled and others implemented over a longer period,” he said.

Callen also expected the Saudi government, the public investment fund – the Saudi sovereign heritage fund – and the oil company Saudi Aramco to collect funds by borrowing or tapping the capital markets this year.

Refusal of income

Despite the efforts of Saudi Arabia to diversify in tourism, renewable energies and technology, oil remains the main backbone of its economy.

In November, the Saudi finance ministry provided for revenues equivalent to around $ 316 billion for the year 2025, while spending was estimated at around $ 342 billion, which means a deficit of around $ 26 billion.

Saudi Aramco, Saudi Arabian oil company, said last month that it expected $ 85.4 billion in dividends this year, compared to $ 124 billion in 2024 and $ 97.8 billion the previous year. Since then, the drop in oil prices should further reduce income.

“They hit a wall,” Alaoudh, director of the Middle East Democracy Center told Bi Abdullah.

In November, reports suggest that the line, a key element of the Neom, was to be complained to focus on making a development of development of 1.5 mile, including a stadium should accommodate the FIFA World Cup of football in 2034. Saudi Arabia must also host the 2029 Asian winter games.

THE CEO of Neom Also resigned in November after six years in the role, without explanation given for this departure.

The same month, Mohammed Al Aljaadan, the Saudi finance minister, described Neom As a “very long -term program” and minimized the idea of ​​short -term yields.

He declared in a press release at the time that the kingdom had a solid financial situation and that his development projects and his plans had not been significantly affected.

The Ministry of Finance did not respond to a request for comments.

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Difficult choice

The Minister’s comments did not prevent himself from wondering if the great vision of the kingdom can be maintained or should be reduced.

“It is possible to increase more non -oil income thanks to the taxation of goods, income taxes or even to further increase VAT,” said Callen.

“The most likely response is to slow down the implementation of capital expenditure projects and increase loans in the hope that oil revenues will rebound in the coming years.”

The International Monetary Fund said in April 2024 that Saudi Arabia needed oil to be around $ 96 a barrel to finance its expenses.

Andrew Leber, a non -resident scholar in the Carnegie Middle East program, told Bi: “The drop in world oil prices will make it more likely that the Saudi state entities considerably reduce or drop several of their key megaprojects.”

The forecast of the oil prices trajectory had become even more difficult after the “extreme volatility” that the Trump administration had triggered in the world economy, said Leber.

Callen expected Saudi Arabia to prioritize projects “necessary for successful accommodation of global and regional events, and those who directly affect the well-being of Saudi citizens”.

“The lower the price of oil, or more specifically, the lower the oil income – because production is also important – the more pressure there will be to reduce the ambitions of megaprojects.”

Since the Neom is an original idea of ​​the crown prince of Saudi Arabia and the de facto sovereign, Mohammed Bin Salman, Saudi officials are probably looking for means of continuing to move forward.