ABSTRACT
After the Geneva OPEC conference (July 22-25, 1985) the world oil situation continued to deteriorate, Saudi Arabia being especially hard-hit when the decline in demand caused oil production to drop in August to about 2 million barrels a day. Although all OPEC members suffered from the drop in the demand for oil, 1 the impact on Saudi Arabia—if only because of the huge dimensions of previous Saudi production and the accordingly enormous revenue—was most severe. Officially, OPEC refused to reduce prices and attempted to maintain the overall production ceiling; Saudi Arabia was forced to reduce its production to a level that it considered unacceptable. In order to meet its budgetary requirements, it was forced to draw upon its financial reserves at the rate of $20 billion a year. Many of its economic development projects were curtailed, and the country experienced a very large deficit in its balance of payments.
