Usually, when an economy is highly dependent on one particular commodity export, it doesn’t make sense to ask if a crash in such a commodity’s price is good for that economy. It might seem downright obvious; however, you need to look beyond the surface when it comes to systemic shocks. In fact, considering the general and political trends in Saudi Arabia, the current crash in oil prices might just be the wake-up call it needs. Let’s face it: Saudi Arabia needs to undergo some serious structural and cultural reform. Maybe the crashing oil prices can help it achieve a moment of clarity that can enable it to identify options that would ensure its long-term stability.
Renewed focus on monoculture
There are no two ways about, Saudi Arabia is a monoculture economy. It only has one cash export, and that is oil. As much as it likes to try to diversify its economy, it really hasn’t been all that successful. Saudi Arabia’s economy is dependent on oil to the tune of 90% of its gross receipts. This is seriously bad news. It can’t obviously go on like this forever. It’s a good idea to look at the current depression in oil prices as an impetus for some serious economic soul-searching for Saudi Arabia. Maybe its overdependence on one export can lead it to get the political will to finally and effectively diversify its economy.
Paves the way for positive political fluidity
Another potential positive aspect of crashing oil prices is that it shakes Saudi Arabia’s social subsidies. In fact, it might shake it so much that people can engage in a healthy dialogue regarding political fluidity in Saudi Arabia. Of course, one shouldn’t have any delusions that Saudi Arabia will all of a sudden turn into a western-style liberal democracy. No. Don’t expect political changes to be that drastic overnight. Some level of political fluidity and open exchange would be good for Saudi Arabia’s long-term stability. Considering the social shock that continued depressed oil prices can impose on Russia’s welfare system, this might actually turn out to be a golden opportunity.