Introduction

Saudi Aramco is one of the largest and most profitable companies in the world. It is a state-owned enterprise
that has a monopoly on the production of oil within Saudi Arabia. This paper will examine Saudi Aramco's
monopoly power in economic terms, including the reasons for its monopoly, its impact on the economy, and
the challenges it faces.

Reasons for Saudi Aramco's Monopoly Power

There are several reasons why Saudi Aramco has a monopoly on oil production within Saudi Arabia. First, the
company was established in 1933 as a joint venture between the Saudi Arabian government and Standard Oil of
California, which later became Chevron. Since then, the company has had exclusive access to the country's oil
reserves, which are some of the largest in the world. Second, the Saudi Arabian government has maintained
tight control over the oil industry, which has limited competition and allowed Saudi Aramco to maintain its
dominant position. Third, the company has invested heavily in research and development, which has allowed it
to become one of the most efficient and technologically advanced oil producers in the world.

Impact of Saudi Aramco's Monopoly Power on the Economy

Saudi Aramco's monopoly power has had a significant impact on the Saudi Arabian economy. First, the
company has generated massive amounts of revenue for the government, which has been used to fund public
services and infrastructure projects. In 2019, the company reported revenue of $356 billion, which accounted for
more than half of the country's gross domestic product (GDP).

Second, the company has created jobs for Saudi Arabian citizens. In 2019, the company employed more than
70,000 people, the majority of whom were Saudi Arabian nationals. The company also has an extensive supply
chain, which creates jobs in other industries such as transportation and construction.

Third, the company has played a significant role in the global oil market. Saudi Aramco is the world's largest oil
producer and has a significant influence on oil prices. The company's decisions about production levels and
pricing can have a ripple effect throughout the global economy.

Regulatory Framework for Saudi Aramco's Monopoly Power

Saudi Aramco's monopoly power is regulated by the Saudi Arabian government. The government sets
production levels and pricing for oil, and it also controls the company's investment and expansion plans. In
2019, the government announced that it would list a portion of Saudi Aramco's shares on the stock market,
which would open the company up to greater scrutiny from investors and regulators.

However, Saudi Aramco's monopoly power is also subject to international regulation. The Organization of the
Petroleum Exporting Countries (OPEC) is a cartel of oil-producing countries, including Saudi Arabia, that work
together

DEMAND AND SUPPLY CURVE FOR ARAMCO`s

The demand and supply curve for Saudi Aramco, as an oil-producing company, can be represented as follows:
Demand Curve:

The demand curve for Saudi Aramco's oil represents the relationship between the quantity of oil demanded by buyers and its
price. Generally, as the price of oil increases, the quantity demanded by buyers decreases, and vice versa. The demand curve for
Saudi Aramco's oil is affected by a number of factors, including:

Economic growth: As economies grow, the demand for oil increases

Political and geopolitical factors: Political instability, wars, and conflicts can affect the demand for oil, as they can disrupt the
supply chain and lead to price volatility.
Environmental concerns: Growing concerns about climate change and the use of fossil fuels are leading to increased demand for
alternative energy sources, such as renewable energy.

Supply Curve:

The supply curve for Saudi Aramco's oil represents the relationship between the quantity of oil supplied by the company and its
price. Generally, as the price of oil increases, the quantity supplied by Saudi Aramco increases, and vice versa. The supply curve
for Saudi Aramco's oil is affected by a number of factors, including:

Production costs: The cost of producing oil affects the supply curve, as higher costs can lead to a decrease in supply and vice
versa.
Exploration and production technologies: Advances in exploration and production technologies can increase the amount of oil
that can be extracted, which can lead to an increase in supply.
Government policies: Government policies, such as production quotas, taxes, and subsidies, can affect the supply of oil by Saudi
Aramco.

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The intersection of the demand and supply curves determines the equilibrium price and quantity of Saudi Aramco's oil. If the
demand for oil increases, the demand curve shifts to the right, leading to a higher equilibrium price and quantity. If the supply
of oil decreases, the supply curve shifts to the left, leading to a higher equilibrium price and lower quantity. In contrast, if the
demand for oil decreases, the demand curve shifts to the left, leading to a lower equilibrium price and quantity. If the supply of
oil increases, the supply curve shifts to the right, leading to a lower equilibrium price and higher quantity. Overall, the demand
and supply curve for Saudi Aramco's oil are dynamic and can be affected by a wide range of economic, political, and
environmental factors.

Increasing Demand for Crude Oil The Impact of Higher Gasoline Prices

IMPACT OF CORONA VIRUS ON ARAMCO

 The outbreak of the COVID-19 pandemic in late 2019 and early 2020 had a significant impact on the global
economy, including the oil and gas industry. Saudi Aramco, as the world's largest oil producer, was not immune
to the effects of the pandemic. In this section, we will examine the impact of the COVID-19 pandemic on Saudi
Aramco.

. Decline in Global Oil Demand

The COVID-19 pandemic led to a significant decline in global oil demand. This was due to several factors,
including the lockdowns and travel restrictions that were imposed in many countries to contain the spread of
the virus. The decline in oil demand had a significant impact on Saudi Aramco's revenue and profitability. In
2020, the company reported a net income of $49 billion, down from $88 billion in 2019.

. Reduction in Oil Prices

The decline in global oil demand also led to a reduction in oil prices. This was due to the oversupply of oil
caused by the drop in demand. Saudi Aramco's revenue is heavily dependent on oil prices, so the reduction in
prices had a significant impact on the company's profitability. In March 2020, oil prices fell to their lowest level
in almost two decades. This led to a decline in Saudi Aramco's share price and market capitalization.

. Suspension of Capital Expenditure

The COVID-19 pandemic also led to the suspension of many capital expenditure projects. Saudi Aramco had
planned to invest heavily in expanding its operations in 2020, but the pandemic forced the company to
postpone or cancel many of these projects. This had a significant impact on the company's growth plans and
future revenue potential.

. Delay in IPO

In 2019, Saudi Aramco had planned to launch an initial public offering (IPO) to list its shares on the stock
market. The IPO was eventually launched in December 2019, but the COVID-19 pandemic caused delays in the
listing process. The pandemic led to a decline in global stock markets, which made it difficult to achieve the
valuation that the company had hoped for. The IPO eventually raised $25.6 billion, which was significantly less
than the $100 billion that the company had initially hoped for.

shift of demand and supply curve due to covid

The COVID-19 pandemic has had a significant impact on the demand and supply curves for Saudi Aramco's oil, leading to
significant shifts in both curves. Let's look at how COVID-19 has affected both curves:

Shift in Demand Curve:

Decreased Demand: The COVID-19 pandemic has led to a decrease in global demand for oil due to reduced economic activity
and travel restrictions.
Changes in Consumer Behavior: The pandemic has also led to changes in consumer behavior, with many people shifting to
remote work and online shopping, which has reduced demand for oil used in transportation and commercial buildings.
Decreased Investment: The pandemic has also led to decreased investment in oil and gas projects, which will lead to lower
demand in the future.
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As a result of these factors, the demand curve for Saudi Aramco's oil has shifted to the left, resulting in a decrease in both the
equilibrium price and quantity.

Shift in Supply Curve:

Production Cuts: The COVID-19 pandemic has led to a decrease in the supply of oil as Saudi Aramco and other oil-producing
countries implemented production cuts to stabilize oil prices. In April 2020, Saudi Aramco announced that it would cut
production by 1 million barrels per day.
Disruptions in the Supply Chain: The pandemic has also disrupted the supply chain, leading to delays in production and
distribution of oil.
Reduced Investment: The pandemic has also led to reduced investment in oil and gas projects, which will lead to lower supply in
the future.

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As a result of these factors, the supply curve for Saudi Aramco's oil has shifted to the left, resulting in an increase in the
equilibrium price and a decrease in the equilibrium quantity.

Overall, the COVID-19 pandemic has had a significant impact on the demand and supply curves for Saudi Aramco's oil, leading
to significant shifts in both curves. The pandemic has led to a decrease in global demand and disruptions in the supply chain,
resulting in a decrease in both the equilibrium price and quantity. Additionally, the implementation of production cuts by Saudi
Aramco and other oil-producing countries has led to a decrease in the supply of oil, resulting in an increase in the equilibrium
price and a decrease in the equilibrium quantity.

Elasticity Of Oil

 Oil has a low elasticity of demand, meaning that the demand for oil doesn't change
significantly when the price for it changes, given how dependent the global economy is on it.
 The supply of oil is also fairly inelastic given how complex and costly the process is to
initially set up oil extraction.

The curve DD represents the demand for oil, sloping down and to the right. The shape of the
demand curve varies over time. It is quite inelastic (close to vertical) in the short-run when the
stock of energy-using capital is fixed, meaning that oil consumption barely responds to price
changes. In the long-run, as the housing stock is upgraded, new energy-efficient machinery is
installed or fuel-efficient cars are produced, the curve flattens and we get a larger response of oil
consumption to price changes.

The short-run marginal cost or supply curve is also nearly vertical, so a spike in the price of oil
brings on little new production in the short-run.

The long-run adjustment of oil production to price appears to very long in oil markets.
after covid Aramco`s oil prices
After the initial shock of the COVID-19 pandemic on the oil industry, including Saudi Aramco, there has been some recovery in
oil prices. The pandemic had caused a significant decline in global oil demand due to lockdowns and travel restrictions, leading
to an oversupply of oil in the market and a subsequent drop in prices. However, as restrictions have eased and vaccination
programs have rolled out, oil demand has gradually recovered, leading to an increase in oil prices.

In the second half of 2020, oil prices began to recover as economies reopened and demand increased. Saudi Aramco's revenue
in the third quarter of 2020 increased by 40% compared to the second quarter of the year, indicating a gradual recovery in
demand for its oil products. As of February 2022, the price of Brent crude, the international benchmark for oil prices, has risen
from its lows in 2020 and is trading around $85 per barrel, which is significantly higher than the prices seen during the height of
the pandemic.

The recovery in oil prices has had a positive impact on Saudi Aramco's financial performance.

Saudi Aramco's financial performance is also affected by its production levels. The company has agreed with OPEC+ (the
Organization of the Petroleum Exporting Countries and its allies) to reduce production levels in order to support oil prices.
However, the gradual recovery in demand has allowed OPEC+ to increase production levels, which has led to a slight decrease
in oil prices in recent months. As of February 2022, OPEC+ has agreed to maintain its current production levels until April 2022,
which is expected to support prices at their current levels.