Aramco was founded in 1932 and is Saudi Arabia’s main economic engine
The history of both Saudi Arabia and its oil company are as intertwined as fish is with water.
Starting life as the Arabian American Oil Company just one year after the Kingdom of Saudi Arabia was inaugurated, production took off after the firm drilled Dammam No. 7 – or ‘Prosperity Well.’
In 1945, King Saud and U.S. President Franklin Delano Roosevelt met aboard a Navy Destroyer and agreed that the USA would provide the fledgling kingdom with security in return for oil and political support in the region.
Five years later, the company finished building the largest oil pipeline in the world, stretching from eastern Saudi Arabia to the Mediterranean Sea, which drastically reduced the time and cost of exporting oil to Europe.
By the end of the decade, oil production was above 1 million barrels a day and by 1962, production had risen to 5 billion barrels annually.
The 1973 oil crisis marked a watershed of both Aramco and Saudi-U.S. relations. American support for Israel in the Yom Kippur War was met with extreme disapproval by Saudi Arabia’s King Faisal.
He and other OPEC members imposed an oil embargo on the USA and other Western countries, causing them to fall into deep recessions. He followed this up by purchasing a 25 per cent stake in Aramco.
The higher oil prices made the kingdom a very rich country and in 1980, they took over full control of Aramco.
Aramco and Saudi Arabia-U.S. relations have been closely intertwined since 1932
The oil glut of the 1980s hit the Saudi economy hard. But in 1990, Iraq invaded Kuwait and the, now renamed Saudi Arabian Oil Company, increased production to offset the loss in output from its two neighbours.
The higher oil price provided even greater windfalls for the Gulf Kingdom, but a loss for America which suffered a heavy recession.
By this time, Aramco was focused on increasing sales to the Asian market and by 2005, was valued as the wealthiest company in the world.
From 2003, steadily increasing oil prices, which reached a peak of $164 a barrel in June 2008 saw record revenues come into state coffers.
Since 2015 though, falling prices have damaged the country and the kingdom has looked to diversify its economy and reduce its dependence on oil.
Crown Prince Mohammed Bin Salman (Known as MBS) has said the country needs to end its ‘oil addiction’ and cannot be ‘at the mercy of commodity price volatility or external markets.’
The USA and Saudi Arabia still remain important security partners. But the shale boom and rampant domestic oil production of the last decade has meant America is no longer reliant on Saudi oil to power its economy.