LONDON, England (CNN) -- Not so long ago predictions that oil would break the $100 barrier seemed fanciful, alarmist even. But here we are, with the price of a single barrel of oil now into three digits and beyond.

King Abdullah is the driving force behind Saudi Arabia's massive development projects.

While hearty oil consumers fix an anxious eye on the rising cost of fuel, one country, in particular, is busy raking in the proceeds.

Saudi Arabia has the world's largest proven oil reserves, some 264 billion barrels.

Last year it's estimated to have exported $165 billion worth of oil, around 90 percent of the Kingdom's total revenue.

Saudi Arabia's economy is booming. The Kingdom's nominal gross domestic product rose 5.7 percent in 2007. It's not the rate of growth that's the most impressive -- it's the sheer scale of Saudi Arabia's income and its audacious spending plans.

In 2007, Saudi Arabia predicted its total revenue would rise to $106 billion (SR 400 billion). That figure proved -- as in previous years -- to be wildly conservative.

In fact, the Kingdom was left with a surplus $47.6 billion (SR 178.5 billion), and that's even after spending more money than it had planned.

Saudi Arabia's Economic Cities King Abdullah Economic City (north of Jeddah, near Rabigh)

Prince Abdulaziz bin Mousaed Economic City (Hail)

Jizan Economic City

Knowledge Economic City (Madinah)

Tabuk Economic City

Ras Al Zour Resource City

Sudair City

Forty-odd billion might sound like a staggering surplus, but it's only the third highest in Saudi Arabia's history and represents a drop of 62 percent on the previous year.

There are no firm figures yet on how much money Saudi Arabia made from exporting oil in 2007. SABB estimates a figure in the region of $165 billion (SR 618 billion), a "staggering" figure "more than 118 percent of the UAE's GDP in 2006 and four times bigger than the size of Qatar's GDP during the same year."

Some fear that Saudi Arabia's reliance on the oil industry leaves it particularly vulnerable to a downturn in the market.

However, Saudi Arabia's budget forecasts are based on an oil price of $45 per barrel -- around half the current market price -- so there's widely thought to be plenty of slack in the system.

This is not the first oil boom to bring a flood of money to the desert Kingdom.

The 1970s also saw a sharp rise in the price of crude, followed by heavy spending and substantial debt. This time Kingdom says it's putting its money to good use, building economic cities and investing in education and healthcare to assure the future of its young population.

The jobs dilemma

Despite its vast wealth, unemployment is still relatively high in Saudi Arabia, and is rising. Ratings agency Capital Intelligence recently noted that the Kingdom's challenge to create jobs is exacerbated by demographics -- its population is expected to grow by 40 percent by 2020. "Saudi Arabia will need to generate faster, self-sustaining private sector growth to prevent potentially serious social and fiscal strains emerging in the long run," it says.

Record inflation

Inflation is also a concern. The cost of living hit a 27-year high of seven percent in January, and is unlikely to fall any time soon, according to the Vice Governor of Saudi's central bank. Muhammed Al-Jasser told Reuters that "present inflationary pressures will likely continue in 2008 until the supply response in the real estate market catches up with demand."

Dropping the dollar?

It's been suggested -- by none less than former U.S. Federal Reserve Chairman Alan Greenspan -- that dropping the dollar-peg would lead to a "significant" fall in inflation in Saudi Arabia, and other Gulf countries.

It's an option that Saudi Arabia has refused to consider. Addressing the Shura Council -- a body that advises King Abdullah -- Central Bank governor Hamad al-Sayyari said this week that "easy solutions can be catastrophic in the long term."

The Saudi central bank is confident that government measures to boost welfare payments and subsidies and to restrict lending will reap rewards in coming months.

Longer term, it's planning to build a series of economic cities to provide jobs, homes and a future for its expanding population.

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Desert cities

The largest of the Kingdom's seven new economic cities is named after the man behind Saudi Arabia's grand vision, King Abdullah.

King Abdullah Economic City (KAEC) is being built from scratch, a city in the desert north of Jeddah the size of Washington D.C. The $100 billion plan includes a residential zone, an education zone, an industrial zone, central business district, sea port and resort. Two million residents are expected to live there, with one million of those employed in local jobs.

If all goes to plan, KAEC will be completed by 2016. It's an ambitious task with a relatively short timetable, but in the end, the Kingdom hopes it will stimulate regional growth and employment. E-mail to a friend

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