Gary Shilling, Columnist

Oil's in a Bear Market, and Stocks Will Soon Follow

A bottom oil price of $10 to $20 per barrel -- the marginal cost of production in efficient locales -- still seems valid.

June 27, 2017 at 9:00 AM UTC

By Gary Shilling

Gary Shilling is president of A. Gary Shilling & Co., a consultancy. He is author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation.”

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Saudi Arabia's King Salman recently named his son, Mohammed bin Salman, as his successor. The 31-year-old crown prince plans to modernize the kingdom with his "Vision 2030" economic overhaul aimed at weaning Saudi Arabia off oil via increased private sector activity and foreign investment. His icon-breaking plan is obviously a reaction to the collapse in crude oil prices.

It’s badly needed. Almost 80 percent of government revenue comes from oil money. Saudis enjoy a comfortable lifestyle, supported by oil revenues. Two-thirds work for government-related entities, with many in no-show jobs. The youth population is mushrooming, with 45 percent of the total under the age of 25, and the unemployment rate for those between 15 and 24 is 31 percent. GDP has been declining since 2014.