A Causal Analysis Between Brent Oil Prices and Economic Growth in Saudi Arabia

This paper aims to examine the predictive relationship between oil prices and economic growth in Saudi Arabia. Given the country’s heavy dependence on oil rents as a percentage of their GDP, we will see how fluctuations in oil prices can heavily shape and influence economic performance. Although oil revenues have proven to be a driver of short-term economic growth, it is important to understand the “Oil Curse Theory” which highlights the risks that can be associated with slowed long-term economic growth. Using time series data on real GDP growth and Brent crude oil prices, this paper will contain a predictive model that will support the movement of oil prices and subsequent economic growth in Saudi Arabia. The results will assess the extent to which Brent crude oil price changes do serve as a leader in economic growth in oil exporting countries, specifically, Saudi Arabia.