This paper aimed at investigating the relationship between oil price and some macroeconomic indicators of Saudi Arabia. The co-integration test and VECM were applied to achieve the paper objective. The time series data from (1970-2016) were used. The data was tested for stationarity, and then the co-integration test and VECM were estimated. The results reveal that there is a long run relationship between oil prices and real GDP with weak short run interactions. The result showed that rising of oil prices are negatively correlated with real GDP in the long run. Rising of oil prices may lead to a lower demand for oil in the long run, which will negatively affect government revenue and real GDP growth. The short run results suggest a positive relation between oil prices and real GDP. Rising demand in the short run will increase returns from oil export for the exporting countries. The oil price shocks have significant impact on real GDP in Saudi Arabia. This means the economy of Saudi Arabia will become highly volatile if depends on oil revenue as a major source of income. Diversifying sources of income is highly required in this case.