Agriculture and livestock raising have historically been the basic economic activities of Saudi Arabia, but since the development of the oil industry, the government has sought to diversify its industrial base and improve its basic economic structure, developing roads, airports, seaports, and the power industry. Through a sharp increase in oil prices beginning in 1973, Saudi Arabia began to amass a tremendous cash reserve. The government used its newfound wealth to transform its economy at a rate almost without precedent in modern history. A lack of trained and skilled labor was partially offset by millions of guest workers. By the mid-1980s, however, oil prices were in decline as a system of production quotas created by oil-exporting nations began to break down.

Oil deposits are located in the east, southward from Iraq and Kuwait into the Rub' al-Khali and under the waters of the Persian Gulf. Other mineral resources are known to exist, and the government has pursued a policy of exploration and production in order to diversify the economic base. Geologic reconnaissance mapping of the Precambrian shield in the west has revealed deposits of gold, silver, copper, zinc, lead, iron, titanium, pyrite, magnesite, platinum, and cadmium. There are also nonmetallic resources such as limestone, silica, gypsum, and phosphorite. Forest and rangeland resources are limited, the former covering a total of only about 600 square miles, mostly in Asir.

This is an oil-based economy with strong government controls over major economic activities. Saudi Arabia has the largest reserves of petroleum in the world (26% of the proved reserves), ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 75% of budget revenues, 40% of GDP, and 90% of export earnings. About 35% of GDP comes from the private sector. Roughly 5 million foreign workers play an important role in the Saudi economy, for example, in the oil and service sectors. Saudi Arabia was a key player in the successful efforts of OPEC and other oil producing countries to raise the price of oil in 1999-2000 to its highest level since the Gulf war by reducing production. Riyadh expects to have a moderate budget deficit in 2001, in part because of increased spending for education and other social programs. The government in 1999 announced plans to begin privatizing the electricity companies, which follows the ongoing privatization of the telecommunications company. The government is expected to continue calling for private sector growth to lessen the kingdom's dependence on oil and increase employment opportunities for the swelling Saudi population. Shortages of water and rapid population growth will constrain government efforts to increase self-sufficiency in agricultural products.