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How Will the Death of King Abdullah Affect Saudi Oil Policy?

Contributed by on January 24, 2015 at 12:26 pm

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The death of the king of Saudi Arabia, King Abdullah, due to a lung infection has now been announced and confirmed by multiple sources. This leaves commodity investors, who have already seen extreme volatility in oil prices recently, with the question of what effect this will have on the oil policy of the oil-rich Middle Eastern nation. The Saudi oil producers have been creating a surplus in recent months, driving down oil and gasoline prices in an effort to undermine hydrofracking operations in the United States.

Within hours of the death of Abdullah, his brother Salman officially became the king of Saudi Arabia. In his first public address to the nation, Salman announced his intention to continue the policies enacted by his brother. This statement was made very generally, but it can be logically inferred that it referred specifically to two key point of Saudi policy. The first is the country’s long-standing tradition of extremely conservative Islamic religious law, which has defined Saudi Arabia’s culture and society for much of the last century. The second is economic policy, most likely including the continuance of increased oil production.

Because of Salman’s plan to retain the policies of his predecessor, it is very unlikely that commodity investors will see an end to diminishing oil prices due to the death of Abdullah. Rather, oil policy in Saudi Arabia is almost certain to remain unchanged, at least during the reign of Salman.