The House of Saud – the ruling family over Saudi Arabia – is in some serious trouble.  In fact, you could almost say there is something of a perfect storm brewing for their fall.

First, there is some (more than usual) condemnation of the rather high frequency of beheadings taking place by the state.  After 157 were executed in 2015, another 47 were executed on January 2, 2016, supposedly for terrorism.

While some executions are for murderers (we won’t get into the arguments here over whether a death penalty is still appropriate), the death penalty can also apply to “crimes” such as drug smuggling, or even adultery.

Maybe more Americans will start to take note that this group of thugs is supposedly a great ally of the U.S. government.  Of course, some might be willing to say that some U.S. politicians are thugs themselves.

Overall, it is positive that the world is looking on and applying social pressure.  It is hard to say if people internally are recognizing the tyrannical state that they live in, but it would be hard to imagine that there isn’t at least some talk in secret amongst the populace.

The House of Saud has likely only been able to hold onto power over the last couple of decades due to the support (financially and militarily) of the U.S. government.

Aside from the social and political issues going on, you can throw economic turmoil into the mix.  Or really, you just need the last three letters of “turmoil” to describe the situation.

Saudi Arabia was the main player that decided to keep oil production running high, despite falling oil prices.  Some speculated that they did it to hurt Russia (on behalf of the U.S.?), and some speculated that they did it to hurt the U.S. shale industry.

While lower oil prices have certainly hit the U.S. shale industry hard, it is nothing compared to how much it is hitting Saudi Arabia.  Saudi Arabia is not in the same position as a place such as Dubai where the tourist industry and financial industry thrive.  Much of the Saudi wealth depends on oil.  And when the price is low, oil revenue is low, and there is a lot less wealth going in.

To top it off, the Saudis are building what is supposed to be the tallest building in the world, which will measure 1 kilometer high.

Mark Thornton recently wrote an article on the skyscraper curse, and how building tall buildings – especially those that set new records – is indicative of an economic bust.  To be sure, building skyscrapers doesn’t cause recessions or pop bubbles, but it can be a symptom of the debt and loose money that goes along with artificial booms and bubbles.

When you also throw in the geo-political turmoil and Saudi Arabia’s fighting with groups in Yemen, along with many strained relationships in much of the Middle East, there is a situation ripe for some kind of downfall for the oligarchy.

It is easy to imagine a scenario where Donald Trump is elected president and he decides for the U.S. government to stop lending political support to the House of Saud.  In fact, it doesn’t even take a president.  Public opinion may just end up being strong enough that U.S. politicians feel political pressure to step up criticisms of the regime, or worse, stop support.

Even if a downfall occurs peacefully, or there is some kind of relatively peaceful coup, it would be hard to imagine that it would not cause some havoc in the oil markets.  That is one reason I am not convinced that oil prices are going to stay down in the long run.

I still believe there is a looming economic downturn.  The oil industry was actually the first major bust after the Fed (and the rest of the major central banks) started the unprecedented money creation in the wake of the fall of 2008.  If we are in for a recession, oil could fall further still.

If the price goes down even further, then this just exacerbates the problems for the House of Saud.  There will be competing forces pulling the oil price in opposite directions.

The oil industry will likely be a good investment at some point, but we should expect higher volatility.  Meanwhile, we won’t shed a tear if the House of Saud falls.  Let’s just hope that the tyranny there doesn’t turn into chaos, as we have seen in places like Iraq and Libya.