Higher Gas Prices, Long Lines: What Cheap Oil Means For Saudi Arabia : Parallels The deal in Saudi Arabia has been no taxation and no representation. Bottom-of-the-barrel crude prices changed the first half of the equation this week, as officials cut utility and gas subsidies.
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Higher Gas Prices, Long Lines: What Cheap Oil Means For Saudi Arabia

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Higher Gas Prices, Long Lines: What Cheap Oil Means For Saudi Arabia

Higher Gas Prices, Long Lines: What Cheap Oil Means For Saudi Arabia

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STEVE INSKEEP, HOST:

Now, whoever wins the presidency will be managing one of America's most vital friendships. It's the relationship with Saudi Arabia, whose rulers have been close to the United States for generations.

RENEE MONTAGNE, HOST:

And for all their wealth, the Saudis are facing a tough economic year - in fact, a nearly $100 billion deficit, prompting the government this week to announce big budget cuts and propose new taxes. Citizens of the kingdom are also facing sticker shock at the gas station. This gigantic oil producer is raising domestic fuel prices. NPR's Deborah Amos recently returned from Saudi Arabia. Good morning.

DEBORAH AMOS, BYLINE: Good morning.

MONTAGNE: And let me get this straight. There is something of a panic in Saudi Arabia about getting gas.

AMOS: Yeah, there were extraordinary scenes in Saudi on Monday - huge lines at the gas pumps to fill up before those gas prices went up. All of this came on the same day that the government announced its 2016 budget. A dramatic drop in oil prices blew a big hole in that budget, so there were immediate subsidy cuts for water, for electricity and gas. The gas is still ridiculously cheap. We're talking about a dollar a gallon. But this is just the beginning of a five-year reform plan. I talked to economist John Sfakianakis, and he says Saudi officials have to show they're adjusting to the new reality of the oil market.

JOHN SFAKIANAKIS: The era of plenty has come to an end. The party's over. And over the next year or so, you will see the introduction of a sales tax, a VAT tax, eventually some form of income tax.

AMOS: You know, this is all pretty revolutionary stuff for a country that's used to the welfare state that's paid for by oil revenues.

MONTAGNE: Well, Deborah, will that lead to a revolution? I mean, many people hate to pay taxes.

AMOS: Yeah. Well, look, reactions have been all over the place - angry, proud, jokes. The middle-class reaction is the most interesting. A young Saudi women wrote on Facebook - I go to university with a royal, a princess. She doesn't pay for utilities or gas, so why should I?

Saudis are asking will the royals pay their share? What do I get? Why don't I have a say in what's going on here? You know, Americans know this phrase, no taxation without representation. Saudis could be asking the same thing.

MONTAGNE: Well, this matters, of course, because Saudi Arabia is a major player in the region. It's a big U.S. ally. It's also a rival to Iran. And it's been involved in wars in Syria and Yemen. So will it stay active in 2016? I mean, is it going to spend the money?

AMOS: The budget numbers here are clear. The kingdom will continue to spend on arms, even more next year than this one.

MONTAGNE: How, then, do you see this all shake out over the next year?

AMOS: No one is willing to predict because this is a revolutionary change for Saudi Arabia. So expect a volatile year ahead in a country where stability really matters. But economists say oil prices are likely to remain low for some time. The energy markets have fundamentally changed. For the first time, with all this turmoil and all this uncertainty in the Middle East, the price of oil is going down and not up.

MONTAGNE: NPR's Deborah Amos is just back from Saudi Arabia. Thanks very much.

AMOS: Thank you.

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