After two decades, Ali al-Naimi is replaced in government shake-up as Saudi Arabia tries to appease its young populus
As part of a sweeping reform through the government of Saudi Arabia, long-time oil minister Ali al-Naimi has been replaced.
The monarchy announced the reorganization of several major institutions, including the oil ministry and the central bank, as the kingdom works on implementing reform to make it less dependent on oil revenues as early as 2020.
The 80-year old al-Naimi was replaced by 55-year old Khaled al-Falih, who previously served as the health minister and chairman of Saudi Aramco. The royal family appears to be reshuffling the deck in order to appease its growing population below the age of 25, reports The Wall Street Journal.
Over half the country’s population is under the age of 25, many of whom are looking for Saudi Arabia to diversify its economy. The announcement that al-Falih would head the oil ministry was accompanied by the reformulation, elimination or new appointment of a new leaders of a half-dozen other ministries, and the establishment of new commissions for culture and entertainment—all moves which could appeal to younger Saudis.
Don’t expect a policy change right away
Despite the departure of al-Naimi, Saudi Arabia’s oil policy will likely remain unchanged.
“Al-Naimi’s removal is less a reflection on [his] policies, which really have carried the kingdom through two decades of highs and lows in the oil markets, than a reflection of the tough scope of the work ahead in Saudi Arabia” Emily Hawthorne, Middle East analyst at political consultancy Strafor, told CNBC.
An email from his successor, al-Falih, to Reuters confirmed his intentions to maintain the course set by the previous oil minister.
“Saudi Arabia will maintain its stable petroleum policies,” al-Falih wrote. “We remain committed to maintaining our role in international energy markets and strengthening our position as the world’s most reliable supplier of energy.
“We are committed to meeting existing and additional hydrocarbons demand from our expanding global customer base, backed by our current maximum sustainable capacity.”
Saudi Arabia produced 10.1 MMBOPD in April, according to secondary sources reported in OPEC’s monthly report. The kingdom’s production grew 14 MBOPD in April from the previous month.
It’s also in Saudi’s long-term interest to keep crude oil prices low now in order to limit demand shift to alternative fuels such as shale and, at the same time, spur economic change in the kingdom, Taurus Wealth Advisors executive, Rainer Michael Preiss, told CNBC.
The sudden change in a number of high-profile positions also signals that Crown Prince Mohammed bin Salman, who is in charge of the sweeping reform the kingdom plans to undertake in order to reduce its dependency on oil, is growing in prominence.
“He’s sending a message that they are making these decisions; they can make these calls on a more regular basis when needed,” said ClipperData’s commodity research director, Matt Smith.
