As Oil Prices Drop, Will Vision 2030 Collapse?
With negotiations underway in Saudi Arabia to resolve the Russian-Ukrainian war, global markets are bracing for a major shift—one that could spell trouble for the Kingdom. Over the past two years, the war kept oil demand high and prices soaring, allowing Saudi Arabia to reap massive financial benefits. But as peace discussions gain traction, energy experts predict a sharp decline in oil prices, threatening the very foundation of Saudi Arabia’s economic model.
While Saudi officials celebrate Riyadh’s diplomatic role, the reality is starkly different. The Kingdom leveraged the war to generate record-breaking oil revenues, financing its ambitious Vision 2030 projects. But as global demand weakens and Russian oil returns to the market, Saudi Arabia now faces the risk of declining revenues, mounting budget deficits, and economic turbulence that could derail its long-term ambitions.
The War Boosted Saudi’s Economy—But at What Cost?
The Russian-Ukrainian war created a windfall for oil-producing nations, and Saudi Arabia was no exception. With prices soaring above $100 per barrel, the Kingdom enjoyed financial surpluses for the first time in years, pouring billions into grand-scale projects like NEOM and The Line while promoting itself as a leader in global energy markets.
However, this golden era of high oil revenues is nearing its end. As sanctions on Russia ease, global supply is increasing, pushing oil prices downward. Analysts predict that if peace is reached, crude oil prices could drop below $70 per barrel, a development that could have serious consequences for Saudi Arabia’s budget.
Can Saudi Arabia Survive Without High Oil Prices?
Despite years of promises to diversify the economy, Saudi Arabia remains deeply reliant on oil revenues. The country needs oil prices to remain above $80 per barrel to balance its budget—and over $96 per barrel to fund Vision 2030’s ambitious projects. If prices drop, the government will face a severe financial shortfall, forcing it to take drastic measures such as:
- Cutting government spending on key infrastructure and social programs
- Delaying or scaling back Vision 2030 projects due to funding shortages
- Increasing taxes and reducing subsidies, putting more strain on citizens
- Issuing more debt, further weakening its financial position
A Repeat of the 2016 Economic Crisis?
Saudi Arabia has been here before. Between 2014 and 2016, oil prices collapsed, leading to a 15% budget deficit and forcing the government to slash subsidies, increase fuel prices, and introduce new taxes. The result? Rising living costs, economic stagnation, and growing public discontent.
Now, with oil prices expected to decline again, a similar scenario looms on the horizon. Despite grand promises, Vision 2030 has yet to deliver a viable non-oil economy, leaving Saudi Arabia trapped in its dependency on crude exports. The Kingdom’s signature mega-projects, including NEOM, the Red Sea Project, and Qiddiya, require hundreds of billions of dollars—funds that may no longer be available in a post-war oil market.
Will Saudi Arabia Turn to Debt?
With a shrinking budget surplus, Riyadh may be forced to borrow at unprecedented levels. Saudi Arabia’s debt has already more than doubled since 2016, and another oil price slump could push the Kingdom toward an unsustainable borrowing spree. In 2016, foreign reserves plummeted by 20% in a single year as the government scrambled to cover budget deficits. A similar financial crisis could emerge if reserves are depleted again to compensate for lower revenues.
Saudi Arabia’s Biggest Test Yet
The end of the war in Ukraine could mark the beginning of Saudi Arabia’s most difficult economic challenge in years. The Kingdom profited immensely from war-driven oil prices, but with global demand slowing, it now faces the harsh reality of an unbalanced economy, unsustainable spending, and unfinished megaprojects.
The critical question remains: Can Saudi Arabia withstand a prolonged period of low oil prices? Or will the cracks in Vision 2030 become impossible to ignore as financial pressures mount?
Time will tell, but one thing is clear: Without urgent reforms, Saudi Arabia’s economic future is on fragile ground, and Vision 2030 may remain just that—a vision.
