Goodbye oil! Electric cars will soon be coming out of Saudi Arabia. The American manufacturer Lucid Motors, which counts among its shareholders the Saudi sovereign wealth fund Public Investment Fund, announced at the end of April that it would build the country’s first electric vehicle assembly plant. The same fund also took a 5.01% stake in Japanese video game maker Nintendo in mid-May.
The kingdom, headed in fact by Crown Prince Mohammed Ben Salman, known as “MBS”, wants to accelerate the diversification of its economy and it now has the means, thanks to a price per barrel which is around 110 dollars (103 euros). “The rise in prices allows Saudi Arabia to achieve objectives that seemed too ambitious a few years ago”, assures François-Aïssa Touazi, of the Ardian investment fund, based in Paris. Objectives detailed in the “Vision 2030” plan and which consist in developing the sectors of tourism, entertainment, hydrogen or new technologies.
The war in Ukraine has greatly enriched the Gulf countries. The rise in oil prices of around 20% since the start of the conflict on February 24 has increased their income, as has the arrival in Dubai of Russian oligarchs wanting to protect their fortunes from international sanctions. The Gulf region is also the only one in the world to have seen its growth forecast revised upwards by the International Monetary Fund, between October 2021 and April 2022. This should reach 6.4% in 2022, against 2 .7% in 2021.
In the first quarter of 2022, the Saudi economy even recorded growth of 9.6%, unheard of for ten years. A sign of the improvement in the oil sector, the capitalization of the oil company Aramco, which recorded a net profit of 39.5 billion dollars in the first quarter of 2022 alone, has become the highest in the world, passing again in front of the American giant Apple.
“This is not necessarily the return of easy money. Countries are well aware of the danger of dependence on oil”, notes François-Aïssa Touazi. This new oil boom could quickly turn into a curse, when reserves run out, global consumption declines or prices drop. In other words, soon. “Paradoxically, high prices do not benefit oil producers in the long term, because they destroy demand by encouraging consumers to turn to renewable energy or other options”adds Tarik Kaoukji, head of investments at Sununu Advisors, a firm based in Kuwait.
You have 61.66% of this article left to read. The following is for subscribers only.