OIL PRICES, DOMESTIC RESOURCE GAPS, AND BREAKEVEN OIL PRICES IN THE OIL-EXPORTING COUNTRIES

Abstract

This paper analyzes the economic impact of the oil prices, the domestic resource gaps, and the
fiscal and external breakeven oil prices on the oil exporting countries (OECs). Specifically, this
paper aims to examine the empirical behaviors of the oil prices, the domestic resource gaps, and
the fiscal and external breakeven oil prices along with their influence on the economy of Saudi
Arabia in order to determine the oil-economic gain/loss (OEG/L) and its influences on the Saudi
Arabia economy over the period of 2008 to 2018. This study uses exploratory research design,
with both linear and nonlinear regression models. This paper finds the oil prices, the domestic
resources gaps, and the fiscal and external breakeven oil prices exert significant influences on the
economic growth in Saudi Arabia. In addition, the fiscal breakeven oil price is considerably high
in Saudi Arabia and has a marginal OEG/L of USD 2.3582 per barrel. Moreover, it is observed
that the oil price has an irregular and unpredictable movement behavior and co-moved with the
domestic resource gaps in Saudi Arabia. The findings implies that the economy diversification in
Saudi Arabia could be achieved by setting policy on improving non-oil sectors and encouraging
private sector involvement.