Saudi Arabia is the world's second-largest producer of crude oil. So the news that the country's King Abdullah has died certainly has the potential to shake up global oil markets. Already, there are signs of (small) jitters: Shortly after Abdullah's death was announced on state television, the price of West Texas Intermediate crude traded in the United States jumped roughly 2 percent, to $47 per barrel. The key question that will be on everyone's mind is whether Saudi Arabia might alter its controversial policy of keeping oil output high even as the rest of the world is oversupplied with crude. This policy has helped pushed global oil prices down over the last few months. But those low prices are also putting a dent in the country's budget, and the stance has attracted criticism from some members of the royal family. In the short term, analysts say it's unlikely we'll see a huge shift following King Abdullah's death — especially since the newly announced king, Salman bin Abdel-Aziz, has explicitly backed the country's oil policy. Still, this is a story worth keeping an eye on, not least since Salman is himself 79 years old. "In my view, we're not going to see a big change in Saudi oil policy [with the new president]," said Bob McNally, a former White House official and now head of Rapidan Group, a Washington-based consultancy. "But there may be some uncertainty and commotion in terms of what will come next."

Saudi Arabia's recent policies have helped keep oil prices low

To understand what's going on, we have to go back to November of last year. At the time, global oil prices were already falling due to soaring production in the United States and Canada, coupled with sagging demand in places like Europe and Asia. Basically, the world had far more oil than it needed, and prices were sliding as a result. That brought us to OPEC's big meeting on November 27. At the time, many observers wondered whether the cartel — which produces 40 percent of the world's oil — might cut back on its output to prop up prices. After all, countries like Iran, Iraq, and Venezuela need high oil prices to balance their budgets. But Saudi Arabia, the cartel's largest producer, refused to cut back on output. Saudi officials didn't want to surrender market share. Instead, they were hoping that the decline in prices would throttle high-cost oil producers in the US and Canada. (It costs far more to extract oil from shale formations in Texas and North Dakota than it does to pump oil from Saudi Arabia's oil fields.) Once Saudi Arabia announced that they would maintain output, global prices crashed even further — eventually tumbling down to their current level of below $50 per barrel. That's the reason why gasoline in the United States is now the cheapest it's been since 2009. In the months that followed, Saudi Arabia's officials have reiterated support for this policy. In December, the country's oil minister, Ali al-Naimi, said he didn't care if prices crashed to $20 or $40 per barrel, he wasn't going to budge from his position. "It is not in the interest of OPEC producers to cut their production, whatever the price is," he said. But this stance has been controversial with some members of the Saudi royal family. After all, the country needs oil prices around $80 per barrel or so in order to balance its budget. Citigroup has predicted that the Saudi government may have to cut back on social spending this year — spending that was put in place to tamp down on unrest after the Arab Spring. And, while the kingdom has built up $750 billion in foreign reserves to finance those deficits, the whole situation makes some Saudis nervous. "The big fear, or let's say the big disaster, is that the ministry will continue withdrawing from the state financial reserves until they are totally depleted as was the case long time ago, when we were forced to borrow from abroad," wrote Prince Al Waleed bin Talal, a member of the royal family, in a letter in January. And one of Abdullah's (many) sons, an assistant minister for petroleum affairs, was reportedly not a fan of the country's decision to maintain output. But through it all, King Abdullah stood behind Naimi — and his policy to maintain Saudi output. Which raises the question: What happens now that Abdullah is gone?

Why the Saudis might keep their oil policies in place

McNally, for his part, thinks it's unlikely that Saudi Arabia will see a massive shift in oil stance even without Abdullah — at least in the short term. The Saudis quickly announced that the new king will be Abdullah's brother Salman bin Abdulaziz — and he appears to support the country's current oil policy. Back on January 6, Salman delivered the nation's "state-of-the-kingdom" address in which he said that the country would show a "firm will" even as oil prices tumbled. "This is now state policy," McNally said. "Naimi wouldn't be freelancing on his own." One reason that Saudi Arabia might continue to maintain output — even though low prices are hurting their budget — is that they don't really have any other great options. If Saudi Arabia were to cut back on production, prices might remain low anyway. In that case, all that would happen is that the Saudis would lose market share to rival countries like Iran. (Indeed, this is exactly what happened when Saudi Arabia cut back on production in the 1980s in a failed attempt to prop up prices.) That all said, any change in leadership always creates some uncertainty — especially since the new king Salman is already 79 and reportedly in poor health himself. (The next member in line is a half-brother, Muqrin.) So it's entirely possible that further unexpected changes could be on the way.

Further reading

Why oil prices keep falling — and throwing the world into turmoil Saudi Arabia's King Abdullah is dead. He left his successors with a lot of problems.

King Abdullah of Saudi Arabia, who came to the throne in old age and earned a reputation as a cautious reformer even as the Arab Spring revolts toppled heads of state and Islamic State militants threatened the Muslim establishment that he represented, died, Saudi officials said Friday. He was 90. The cause was unknown, but he had been in the hospital since December and placed on a respirator. The royal court, in an announcement quoted by the official Saudi Press Agency, said the king had a lung infection when he was admitted on Dec. 31 to the Riyadh hospital named for his father, Abdul Aziz, who through conquest and multiple marriages forged the desert kingdom in the years after the destruction of the Ottoman Empire. Accidents of birth and geology made Abdullah one of the world’s wealthiest and most powerful men. In control of a fifth of the world’s known petroleum reserves, he traveled to medical appointments abroad in a fleet of jumbo jets, and the changes he wrought in Saudi society were fueled by gushers of oil money. As king he also bore the title of custodian of Islam’s holiest mosques, in Mecca and Medina, making him one of the faith’s most important figures. Abdullah had grown accustomed to wielding the levers of power long before his ascension to the throne in August 2005. After his predecessor, King Fahd, a half brother, had a stroke in November 1995, Abdullah, then the crown prince, ruled in the king’s name. Yet Abdullah spoke as plainly as the Bedouin tribesmen with whom he had been sent to live in his youth. He refused to be called “your majesty” and discouraged commoners from kissing his hand. He shocked the 7,000 or so Saudi princes and princesses by cutting their allowances. He was described as ascetic, or as ascetic as someone in the habit of renting out entire hotels could be. Abdullah’s reign was a constant effort to balance desert traditions with the demands of the modern world, making him appear at times to be shifting from one to the other. When popular movements and insurgencies overthrew or threatened long-established Arab rulers from Tunisia to Yemen in 2011, he reacted swiftly. On his return from three months of treatment for a herniated disk and a blood clot in New York and Morocco, his government spent $130 billion to build 500,000 units of low-income housing, to bolster the salaries of government employees and to ensure the loyalty of religious organizations. He also created a Facebook page, where citizens were invited to present their grievances directly to him, although it was not known how many entries actually reached him. But in at least two telephone calls he castigated President Obama for encouraging democracy in the Middle East, saying it was dangerous. And he showed no tolerance in his country for the sort of dissent unfolding elsewhere. The grand mufti, the kingdom’s highest religious official, proclaimed that Islam forbade street protests. Scores of protesters who failed to heed that message were arrested in the chiefly Shiite eastern provinces. A new law imposed crippling fines for offenses, like threatening national security, that could be broadly interpreted. Reaching beyond his borders, Abdullah sent tanks to help quell an uprising in neighboring Bahrain. Moves of Moderation Still, Abdullah became, in some ways, a force of moderation. He contested Al Qaeda’s militant interpretations of the faith as justifying, even compelling, terrorist acts. He ordered that textbooks be purged of their most extreme language and sent 900 imams to re-education sessions. He had hundreds of militants arrested and some beheaded. But he was also mindful that his family had, since the 18th century, derived its authority from an alliance with the strict Wahhabi sect of Sunni Islam. He accordingly made only modest changes to the kingdom’s conservative clerical establishment. When Islamic State forces conquered vast stretches of Syria and Iraq, imposing a creed linked to Saudi Arabia’s own, the kingdom was slow to respond. On one occasion, however, Abdullah chastised senior clerics for not speaking out more forcibly against the jihadists, and he eventually sent Saudi pilots to participate in an American-led campaign against the Islamic State. Abdullah’s Saudi Arabia had hurtled from tribal pastoralism to advanced capitalism in little more than a generation. The fundamentalist clerics who gave the family legitimacy remained a powerful force. Women who appeared in public without the required covering risked arrest or a beating from the religious police. Abdullah did make changes that were seen as important in the Saudi context. He allowed women to work as supermarket cashiers and appointed a woman as a deputy minister. At the $12.5 billion research university he built and named for himself, women study beside men. However, he did not fulfill a promise made to Barbara Walters of ABC News in his first televised interview as king in October 2005: that he would allow women to drive, a hugely contentious issue in Saudi Arabia. Although he ordered the kingdom’s first elections for municipal councils in 2005, a promised second election, in October 2009, in which women would vote, was postponed until September 2011. Then in March of that year, the Ministry of Municipal and Rural Affairs announced that the question of women voting would be put off indefinitely “because of the kingdom’s social customs.” Abdullah’s greatest legacy, however, may prove to be a scholarship program that sent tens of thousands of young Saudi men and women abroad to study at Western universities and colleges. It has been suggested that the changes long resisted by conservative forces — resistance that even a king could not overcome — would one day come about as those young men and women rose in the government, industry and academia. Perhaps Abdullah’s most daunting challenge arrived in the wake of the Sept. 11, 2001, terrorist attacks, with the revelation that 15 of the 19 hijackers were Saudis. The royal family at first railed at what it called a vicious public relations campaign against the kingdom, then ruthlessly suppressed known militants — not least because the monarchy itself was a main target of Al Qaeda. Striking a balance was almost always Abdullah’s preference. He strove to keep oil prices high, but not so high that they prompted consumers to abandon petroleum, then hedged his bets by investing billions in solar energy research. In 2008, he convened a meeting of world religious leaders to promote tolerance, but held it in Madrid rather than Saudi Arabia, where the public practice of religions other than Islam is outlawed. Yet Abdullah could, and did, take strong positions. He denounced the American-led invasion of Iraq as “an illegal occupation”; proposed a comprehensive peace plan for the Middle East that included recognition of Israel by Arab nations; and urged in a secret cable that the United States attack Iran, Saudi Arabia’s great rival. “Cut off the head off the snake,” he said. His kingdom’s interests always came first. Even though American oil companies had discovered and developed the great Saudi oil fields, he cut deals with Russian, Chinese and European petroleum companies. He made it clear that the world’s energy appetites mattered less than Saudi Arabia’s future.

 

A Rigorous Upbringing

Abdullah bin Abdul Aziz al-Saud was born in Riyadh in 1924 into a vast, complicated family. His father, Abdul Aziz, had many as 22 wives. Abdul Aziz, whose ancestors founded a precursor to the present Saudi state in 1744, chose his wives partly to secure alliances with other Arabian tribes. Abdullah’s mother, Fahda bint Asi al-Shuraim, was a daughter of the chief of the Shammar, whose influence extended into Syria, Iraq and Jordan. Abdullah was Fahda’s only son. She also had two daughters. King Abdul Aziz was not an indulgent father to his dozens of sons. He was quoted as saying, “I train my own children to walk barefoot, to rise two hours before dawn, to eat but little, to ride horses bareback.” When the young Abdullah once neglected to offer his seat to a guest, Abdul Aziz sentenced him to three days in prison. Abdullah, who overcame a stutter, was educated in religion, Arab literature and science by Islamic scholars at the royal court. From the Bedouin nomads, he learned traditional ways, including horsemanship and desert warfare. In 1962, he was appointed commander of the National Guard, which draws recruits from the Bedouin tribes, protects the king and acts as a counterweight to the army. Four of Abdullah’s half brothers preceded him to the throne. King Khalid appointed Abdullah as second deputy prime minister in 1975. In 1982, Fahd, Khalid’s successor, named him deputy prime minister and crown prince. After Fahd’s stroke, Abdullah ran the government at first as regent. Political pressures later forced the removal of the regent title, but Abdullah remained the effective decision-maker until assuming the throne in 2005. He refused to sign any official papers with his own name as long as his stricken brother lived. Fahd died on Aug. 1, 2005. One of King Abdullah’s first official acts was to pardon two Libyans accused of plotting to kill him, a result of Egypt’s engineering a reconciliation between the two nations. He also pardoned three Saudi academics who were in prison for urging the kingdom to adopt a constitutional monarchy. He went on to establish job-training programs to help ease severe unemployment among educated young Saudis, to develop long-wasted natural gas as a commodity that could be exported, and to bring Saudi Arabia into the World Trade Organization. He became the first Saudi head of state to meet a pope, Benedict XVI, in 2007. Although he reaffirmed his kingdom’s longstanding alliance with the United States, tensions arose with events. Abdullah refused, for instance, to permit American bases on Saudi territory for the invasion of Iraq in 2003, something he had allowed in the first Gulf War. ‘For the Greater Good’ The king also grappled with domestic crises. The deaths of 15 girls in a dormitory fire in Mecca in 2002 caused an international uproar when it was learned that the religious police had not let them escape from the flames because they were not properly dressed. Furious, the king dismissed the head of women’s education. In 2007, he pardoned a teenage girl who had been sentenced to six months in jail and 100 lashes after being raped. She was convicted after being found in a car alone with a man who was not her relative, a crime under Saudi law. Though Abdullah made it clear that he thought the girl was guilty, pleasing the religious authorities, he pardoned her, he said, “for the greater good.” In line with Islamic law, Abdullah kept no more than four wives at once, and was married at least 13 times, according to Joseph Kechichian, who studies the royal family as a senior fellow at the King Faisal Center for Research and Islamic Studies in Riyadh. Abdullah fathered at least seven sons, nearly all of whom have occupied powerful positions as provincial governors and officers in the national guard, Dr. Kechichian said. Of his 15 known daughters, one is a prominent physician, and another has appeared on television to advocate for women’s rights. Abdullah may have resembled his austere warrior father, but he had a modern sensibility. A diplomatic cable revealed by WikiLeaks in 2010 said that he had suggested to an American counterterrorism official that electronic chips be implanted in detainees at Guantánamo Bay, Cuba. He said it had worked with horses and falcons, to which the American replied, “Horses don’t have good lawyers.”