Economy

Like many countries in the Middle East, Saudi Arabia is undergoing numerous changes because of its great petroleum wealth. Until after World War II, when the oil boom came, the economy was based almost entirely on subsistence farming and nomadic herding, both of which had remained unchanged for hundreds of years. There was no industry and very little trade or commerce. One of the few sources of revenue was the hajj (pilgrimage) made by thousands of Muslims to the holy city of Mecca each year.

Since the mid 20th century, petroleum has provided the government with the money needed for modernization. In fact, the increase in the price of oil in the late 20th century led to a spate of development in the country. Among the many undertakings are the development of water resources; the modernization of agriculture; the improvement of transportation, communication, and education; electrification; and the establishment of manufacturing. Development is guided by five-year plans drawn up by the Saudi government.

Saudi Arabia is the world's leading producer of petroleum and natural gas. The large reserves of oil in the country contain around 260 billion barrels of oil, which account for about a fourth of the world's identified oil reserves. Most of the oil is produced (both inland and offshore) in the Eastern Province, and the Persian Gulf. Virtually all the oil is produced by the Saudi Arabian Oil Company (Saudi Aramco), which is owned by the government. The country also has a major role in the Organization of the Petroleum Exporting Countries (OPEC).

To a large extent the oil is exported unrefined, mostly through the Persian Gulf terminal at Ras Tanura but also via pipeline to the Red Sea port of Yanbu. However, crude oil is increasingly being refined within Saudi Arabia, mainly at Ras Tanura, Jidda, and Yanbu.

Most of Saudi Arabia's natural gas is produced as a by-product of the oil industry. Liquefied petroleum gas (LP gas) is the chief product of the natural gas industry, and the country is a major exporter of this product.

As far as natural resources are concerned, Saudi Arabia lacks in permanent rivers or fresh water bodies, resulting in inadequate water sources. The main resource for the water required for agriculture is an underground reservoir that runs from the highlands to the east of Turkey. Desalination plants in the Red Sea and Persian Gulf, which remove the salt from sea-water, provide Saudi cities and towns with water.