The Effect of Oil Prices on GDP in Saudi Arabia.

Abstract

الملخص: This study examines the impact of oil prices on gross domestic product of the Kingdom of Saudi Arabia in the period between (1983–2018) using Johansen Cointegration and Engle-Granger Causality test. The results reveal that there is a long-term relationship between gross domestic product and price of oil in the Kingdom of Saudi Arabia and there is a causal relationship in two directions between the gross domestic product and the price of oil, as each of them effects the other. The results of the research confirm that the price of oil has an important and pivotal role in the Saudi economy and from here we conclude how dangerous it is to rely on it as a major source in the economy as it is a non-renewable and depletable source. Therefore, the study recommends the development of renewable energy sources, diversification of the economic base and turning to the industrial sector, the pharmaceutical sector and other renewable sectors so that the Kingdom does not become totally dependent on the oil sector.