Brexit Fallout Saudi Oil Production

Continued Brexit Fallout May Affect Saudi Oil Production


One of the more unforeseen circumstances of the Brexit vote last June appears to be on the verge of affecting the production of oil in Saudi Arabia. The primary issue deals with the fact that a good portion of the hi-tech equipment that’s used for production purposes is being depleted due to the drop in the British pound.

Saudi Aramco is the Kingdom’s biggest company in the oil industry and relies on British companies like United Corporation to deliver things like air compressors and filters. However, executives at United are dealing with suppliers that will need to boost their prices in order to deal with what’s roughly a 13 percent drop in value since the vote took place.

A vast portion of such supplies that are purchased by United comes from either American companies or those outside the United Kingdom. Their currencies, the dollar and euro, respectively, are in much better shape, with the potential for the United’s bottom line to take a beating as a result.

Given the continuing uncertainty about exactly what will happen and when it will take place, United has been unable to move forward with any expansion plans or to cultivate any new business among clients in the oil industry.

The Saudis may soon be forced to look at alternative options, which brings with it potential ramifications on their end. Simply moving to a new supplier may not cover all possible items that their oil production entails. In addition, seeking out a new option will result in production delays that can cause added havoc on international markets.

What’s worse is that more misery may be coming, since one international finance watcher indicated that another 16 percent drop in the pound may be forthcoming, putting the Saudis in a tighter bind.

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