Why are Middle East countries apparently going broke today over the current price of oil when it was selling in this same range as recently as 2004 (when adjusted for inflation)?
They adjusted their budget to match their income. The Saudis are determined to maintain market share. They are selling the same volume of oil accepting a lower price. So their spending budget is now greater than their income. They have plenty of reserves and they are adjusting their budget slowly.
Imagine if you got a promotion, kept the position for 11 years, and during that time period took out a mortgage, bought an expensive car with big payments, and incurred other large expenses that you didn’t have 11 years prior. Now imagine you lost that job and your salary went back down to what you were earning over a decade ago. You would probably have a hard time paying your big mortgage and expensive car off right?
(CavemanCircus.com)
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