MBS should learn that just because the only tool the Saudis have is a hammer, doesn’t mean the rest of the world’s problems are nails
On Monday, Saudi Arabia’s Crown Prince Mohammed bin Salman, once affectionately known to American elites as “MBS”, cost stock holders about 8 per cent of our net worth over a gambit to boost oil production and flood world oil markets with crude — a move oil-producing nations have tried before, failed at, and will fail at again.
For all of the Wall Street carnage, we saw this only about five years ago. If not for the simultaneous worldwide furor over coronavirus, we’d probably remember it better, and we’d have understood faster that this is a tactic Saudi Arabia is employing out of weakness, not strength.
Put simply, Saudi Arabia needs expensive crude even more than the US-based fracking companies that spent Monday announcing cuts in their capital spending for this year. Its oil money is spent on social programs that keep the peace. By recent estimates, Saudi Arabia needs $80 a barrel oil to balance its budget and provide incomes for citizens not in the oil business. And as the scales fall from western eyes about MBS, we’re reminded that he’s a fairly basic Middle Eastern dictator — and that in that part of the world, welfare spending isn’t a luxury.
Spending to appease the masses is what keeps dictators like MBS on thrones — and out of ditches like the one where Muammar Gaddafi met his fate.