Saudi Arabia’s extraction costs are about $3/barrel, their nation state budget require $80/barrel to break even.

They are burning through reserves at these market prices.

Edit: To your point, it’s going to get ugly locally if market conditions persist.

Saudi makes up shit when they say their extraction costs are $3/barrel. A lot of clever accounting in that one. Actual extraction costs are roughly $10-$15/barrel.

Why do they or why would they make up extraction costs? (Genuinely interested)

Posturing. They want to intimidate producers (and their investors) that have much higher extraction costs, like U.S. frackers and Canadian oil sands firms. "We can bring oil to $10/barrel and still be profitable," you can imagine them saying threateningly.

exactly what exhilaration says below! I work in the oil and gas business. U.S. independent oil companies are survivors. If I have to pick between the U.S. shale producer or Saudi kingdrom, I'll pick the U.S. shale producer every time.

To have an upper hand in negotiation. Everyone knows Saudi can win the war of attrition with oil at low prices they just don’t know by how much.

Still far cheaper then almost everywhere else. $3 or $15

The limited success of their war on Yemen, despite having the 3rd largest military budget in the world, says otherwise.

Isn't there some real issues with the military being larger given the ruling family? Fear of a coup? I though they spent the money on fancy toys and not a big military.

So you're saying KSA has a higher military budget than 1) The US, 2) China, or 3) Russia?

1 No.

2 No.

3 Yes.

The KSA spends 8.8% of its GDP on military expenditure. Seemingly the largest of any country.

https://en.wikipedia.org/wiki/List_of_countries_by_military_...

But KSA has no ambitions towards becoming a global military superpower. For a long time it had a choke point on the economy through its resource monopoly. Until recently that was a much more potent weapon than any number of aircraft carriers.

Russia does have superpower ambitions, which is a rather more expensive business.

My cynical suspicion is that much of the KSA military budget is really just a form of kickback - or possibly protection money, depending how you look at it - to the US mil-ind establishment.

While the Saudis are some of the worst people in the world, their ambitions are limited to keeping the ruling dynasty outrageously rich and maintaining power on their own patch of turf.

The Russian establishment is far more dangerous. It not only has links to organised crime, it also has a complement of nukes, bio, and chem weapons. And it has a very developed infowar, hacking, and social destabilisation arm, based on techniques pioneered by the US, with some home-grown twists to increase effectiveness.

This oil war and related COVID crash are going to do huge damage to the economies of both countries - and a lot of others besides - with increased prospects for instability everywhere.

It's my understanding that KSA largely buys its military equipment from the US (certainly in regard to Army equipment and its air force). I'm pretty sure they're one of the countries approved for F-35 export, and they're known to be F-16 and F-15 customers. The F-35 is not cheap, the other two are relatively cheap (still in the millions).

I don't think anyone is expecting KSA to declare war against Russia, but they're currently at war w/ (part of) Yemen, and they're not exactly happy with Iran, either. The middle east is set to explode, even without US involvement.

3) Russia. Look it up.