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Fossil Fuel Divestment - Saudis Want Out
- Thread starter TheTalkingMule
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- Energy Environment Policy
adiggs
Well-Known Member
Speaking of Saudi oil....this popped up in my feed today.
Secretary of Energy Rick Perry Announces Nearly $20 Million To Help Commercialize Promising Energy Technologies
Sounds pretty good, right? Til I read some of the recipients.
The wealthiest entity in the world apparently needs $700k of my tax dollars to figure out how to drill more safely in Texas. Announced the day after 9/11 no less.
We live in a bizarro-universe.
Secretary of Energy Rick Perry Announces Nearly $20 Million To Help Commercialize Promising Energy Technologies
Sounds pretty good, right? Til I read some of the recipients.
Safer drilling – Reducing risks and costs with real time, downhole kick detection, $700,000
Saudi Aramco, Houston, Texas
Saudi Aramco, Houston, Texas
The wealthiest entity in the world apparently needs $700k of my tax dollars to figure out how to drill more safely in Texas. Announced the day after 9/11 no less.
We live in a bizarro-universe.
Ulmo
Active Member
The paper delay is optional, but it's not hard to find a bevy of paperwork to involve, if they're at all inclined to do so, for whatever reason. I can't 100% assume that it is due to any underhanded plot to do anything --- particular --- and I'm having a hard time coming up with what "particular" might even be that we would be irritated by. For instance, they are an oil company, so to say that it might be pro-oil is ....... well, rather assumed.I begin to wonder whether the Aramco IPO will ever happen
Disclaimer: Nothing in my attempt at a well reasoned paragraph above is meant to imply that S.A. was not (nor is not) behind some of the worst evil the world has ever known.
adiggs
Well-Known Member
One confounding factor that I could see causing a delay in the IPO - from what I've read, Aramco isn't exactly a model of clear, industry - standard accounting. There is also a government interest and a private business separation that needs to be created in the company and government, and making that sufficiently transparent for this large of an enterprise -- I could see that causing some delay.
Brando
Active Member
15 Saudis of 19 hijackers and never allowed the FBI into Saudi Arabia to investigate. Well, I suppose the FBI didn't investigate much anyway. Oil Rules, those with the oil rule.
SageBrush
REJECT Fascism
I cannot remember if this has already been mentioned, but the "divestment" is 5% of ownership.
This just sounds to me like Saudia Arabia has some cash flow shortage or anticipation thereof while they try to BK the shale producers and then set a floor for oil prices.
This just sounds to me like Saudia Arabia has some cash flow shortage or anticipation thereof while they try to BK the shale producers and then set a floor for oil prices.
SageBrush
REJECT Fascism
Clarity of an end point for oil grows exponentially each year. The Saudis were rushing to get this IPO underway while propping up prices, by mid-2019 it'll be plain as day that this is a mediocre investment.
Saudis May Raise Domestic Gasoline Prices by 80%
The government would boost gasoline to parity with varying international prices under the plan, according to a person with knowledge of the matter. At current levels, this could result in a hike of about 80 percent for octane-91 grade gasoline to about 1.35 riyals per liter (0.36 cents), the person said on condition of anonymity. The government plans to delay increases in other energy prices until early 2018, the person said.
Authorities are expected to make a final decision on the plan in September or October, the person said. The Saudi finance, economy and energy ministries didn’t immediately respond to requests for comment.
The government would boost gasoline to parity with varying international prices under the plan, according to a person with knowledge of the matter. At current levels, this could result in a hike of about 80 percent for octane-91 grade gasoline to about 1.35 riyals per liter (0.36 cents), the person said on condition of anonymity. The government plans to delay increases in other energy prices until early 2018, the person said.
Authorities are expected to make a final decision on the plan in September or October, the person said. The Saudi finance, economy and energy ministries didn’t immediately respond to requests for comment.
That's not good.
The end won't come for the Saudis when oil demand peaks or some outside force attacks their land, it'll be when they cross the tipping point and lose popular domestic support. Energy subsidy is a HUGE piece of that support.
Pair this with non-oil revenue slipping even in the wake of massive non-oil subsidy and you have a ticking time bomb.
SageBrush
REJECT Fascism
First off, only 5% of Aramco will be offered for sale.
Second, OPEC has been using its position as a major supplier to manipulate supply ever since, well, OPEC came into existence. When OPEC is pressured by either dropping demand or inability to supply demand then the beginning of the end will be in sight.
The current story is just a temporary cash crunch. OPEC flooded the world market to drive the shale producers to BK and now they are curtailing production to mop up the over-supply. I really would not over-read this story as the end of fossil fuels, as much as I would like it to be so.
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I'm reading it as capitulation to the fact that oil prices are for the most part stuck here til the rapidly approaching end.
The Saudis are running ~$100B annual deficits due to lack of demand growth and US shale. Keeping a "balanced budget" isn't a fiscal concern for them, it's existential.
When the Saudis stop shoveling out the gravy, the people aren't going to stand by and watch the royal family jetsetting with a golden escalator. There's a monthly compact keeping the peace and funds are rapidly dwindling.
The Saudis are running ~$100B annual deficits due to lack of demand growth and US shale. Keeping a "balanced budget" isn't a fiscal concern for them, it's existential.
When the Saudis stop shoveling out the gravy, the people aren't going to stand by and watch the royal family jetsetting with a golden escalator. There's a monthly compact keeping the peace and funds are rapidly dwindling.
SageBrush
REJECT Fascism
It was not so many years ago that OPEC sold oil for under $10 a barrel, and the "social compact" was not threatened. $50 - $60 a barrel oil leaves an amount of cream Americans can only watch on TV.
Brando
Active Member
break even?
or do you actually mean government/royal family/social costs - keeping Saudi society in the black as it were.
"According to data from energy industry consultant Rystad Energy, on average it cost Saudi Arabia less than $9 to produce a barrel of oil last year. That's the cheapest in the world, though fellow OPEC countries Iran and Iraq can produce for around $10 per barrel as well, which is well below rival nations:"
Here's how much it costs both Saudi Arabia and the US to produce oil
Sadly US spends about $1 trillion on foreign entanglements (wars, bases, etc... 8 or 10 billion into Ukraine so far??)
"...United States still maintains nearly 800 military bases in more than 70 countries and territories abroad..."
And another $1 trillion on our Secret Security, fatherland, homeland, NSA, etc.
Top Secret America | washingtonpost.com
Such a sad waste. Nice if we could re-direct and save the oceans/fish for us all.
Breakeven to maintain minimal social order and control. Minimum price point to maintain operations. Production is something like $8.65/b, but if oil goes to $20 for two years it's all over.
Recent efforts to diversify the domestic economy away from oil have failed worse than their pre-IPO oil price propping, which means they're pretty much married to oil until they lose power.
There's no reason to believe 2015's $100B deficit is ever going away. They can temporarily cut massive social programs and fuel subsidies, but the people will always push back. The choice is payment or revolution.
This is the interesting conundrum and it's rapidly coming to a head. How many years can they bleed $60-120B before they bail or are forced to eliminate all expense? Who is going to buy Saudi bonds in 2020 when oil's peak is within sight?
What happens when everyone's income in the entire country disappears? The 5% IPO was a 1-2 year stopgap and even that looks to be in jeopardy.
SageBrush
REJECT Fascism
What is the annual per capita profit per $1/barrel over production cost at current production levels ?
Population is ~ 22M
Production is ~ 3650 M barrels a year
So each $1 profit per barrel is ~ $166 per capita each year
At a $50 - $60 equilibrium and $10 production cost, each citizen gets $6.6k - $8.3k a year
A family of six is subsidized to the tune of $40k - $50k a year.
I'm not seeing the social upheaval. And by the way, SA has invested some of the past profits in a highly repressive police state, with ongoing massive subsidies from their American friends. Imagine you are a Saudi citizen, and get to choose between living in a "modest" welfare state or enjoying a few days in a dungeon before you disappear.
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These two statements seem in conflict to me.
Why would a repressive regime be maintained once it's funding is gone? Without the $40k payoff, there's riots in the streets.
Who is going to lend SA any money once demand peaks? The US will certainly walk away, at least Barry O began walking away. I'm sure the current admin is perfectly content holding hands.
I just think it's interesting that there's no way to illustrate a financial path to the royal family keeping control 10 years from now, but we can't be bothered to discuss it. Even the rosiest oil projections make it infeasible. That's a HUGE deal.
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