Abstract
The export of petroleum products is the base avenue and constitutes a major ingredient of the Saudi economy. It is evident that the oil prices gradually decrease year by year governed by some international uncontrollable factors. The study is based on the secondary data obtained from the website of the Saudi Arabian Monetary Authority (SAMA). The study applies the Co-efficient of variation (CV), chain based (I CB ) and fixed based (I FB ) index numbers, correlation, and line diagram to get variability, movement, co-movement, and sensitivity and trends of the oil prices and dependent public spending avenues. The study reveals that the Saudi government enhances the level of their public spending while the oil prices lowering year by year. There is low positive sensitivity between oil prices and public spending while a negative trend between oil prices and public spending in long run. The shocks of the oil prices affect the public spending maintaining a certain gap between the growth’s trends between of public spending and oil prices progressive order in long run. The trend reveals that the Saudi government basically focuses on education, health, and other community and social services while least on social security & welfare, and housing and community amenities services. Keywords: Oil prices, public spending, sensitivity, trend analysis, Saudi Arabia JEL Classifications: Q40, Q41, I10, I20, I30 DOI: https://doi.org/10.32479/ijeep.10601
Highlights
In Saudi Arabia, revenues from petroleum resources are the main source of income and contribute abundantly to the GDP of Saudi Arabia
The analysis to measure the volatility impact of the oil prices on government spending on health, education, Social Security and Welfare, Housing. and Community Amenities Services and other community and Social services can be divided into two categories i.e. normality of the variability and co-movement of the oil prices and other dependent variables
The variability of oil prices is more than public spending and reveals that the volatility of oil prices is more than public spending
Summary
In Saudi Arabia, revenues from petroleum resources are the main source of income and contribute abundantly to the GDP of Saudi Arabia. Saudi Arabia is the biggest exporter of petroleum products in the world (Investopedia, 2020). Saudi Arabia’s petroleum reserves 17% of the proven reserves of the world and the oil and gas sector constitutes 50% of the Saudi GDP which accounts for 70% of the total export’s revenue (Organization of the Petroleum Exporting Countries, 2020). The total revenue of petroleum products depends on the price and demand for oil in the international market. The prices of oil products start to decline from 2014 gradually year by year. The oil prices affect government spending as the oil prices contribute to the Saudi economy to a larger extent and forced the government to impose new taxes (Alharbi, 2020)
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