The global economy could be severely affected if the current wave of political uprisings spread to Saudi Arabia, the world’s biggest oil producer, ratings agency Standard’s & Poor’s said in its GCC Q1 Outlook report.
While S&P analysts said they saw upheaval in the kingdom as “unlikely”, they added that the impact would have a “tangible adverse economic impact” on oil importers and the global economy.
Kai Stukenbrock, a credit analyst, said in the report that the oil price “could rise beyond historical peak level” should serious uprisings take hold in Saudi Arabia.
Oil peaked at just below $148 a barrel in the summer of 2008 and is currently trading above the $120 mark as other Middle East and North African countries continue to struggle amid political unrest.
“If there were to be political upheaval in Saudi Arabia, a scenario which we currently consider unlikely, the ramifications, both geopolitical and well as geo-economical, could be severe,” Stukenbrock added.
“Depending on the nature of such hypothetical events in Saudi Arabia, the oil price could rise beyond historical peak levels, and if sustained, would have a tangible adverse economic impact on oil importers and the global economy,” he said in the report.
He added that the recent announcement of a $93bn package of extra social spending, wage increases, and additional public sector jobs “underlines that the Saudi government is mindful of potential risks, and is trying to assuage social pressures by tapping its sizable fiscal reserves”.
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