Exactly. People aren't taking the right perspective on all these Saudi moves.
Women aren't now allowed to drive because the royal family thinks it's a good progressive idea, they're doing it to "buy" loyalty. Solar isn't being implemented because they care about the foolishnesd of burning crude oil for electricity, they want to sell those barrels and pay for their electricity with financed solar.
Every effort to modernize or broaden their economy has fallen flat. They put every non-aligned business person in a hotel until they gave up a $150B ransom. Who in their right mind is going to locate anything in "the new saudi Arabia"?
So MBS might be at Bill Gates' house today, but nothing will come from these moves in the long run. They will very quickly need to just sell as much as possible. Do we really think a 10-20 year alliance with Russia will last once things get tough? No way.
Everyone will be pumping like mad for good within 18 months. Every gal for herself. Why wouldn't they?
This one seemingly small move will negate nearly half of all global growth for 2020-2022 if implemented. That's only one of the "thousand cuts".
I agree with this.
And it's also why when I hear about new investments by the O&G industry, I'm not really bothered. In the long run, which is going to become the short run sooner than I think many (though not as many in this thread) think, the market is going to shift to an every entity for itself situation.
I imagine a future arriving soon, that will be something like the Miss and Out style bike races:
Elimination race - Wikipedia
On the track, the last rider over the line every other lap is out of the race. That continues until the final two determine first and second place.
In this race, the entities with the lowest cost of production are in the lead, and as prices go down, the higher cost producers will start bankrupting and leaving the race. Their assets won't all disappear though - they'll get acquired for pennies and produced by somebody else.
The larger context still drives lower and lower oil prices. SA can make a good case (
@jhm made it above) for building a whole host of solar for <$20/MWh because that replaces a lot of crude. That conversion is at something like $11/bbl - clearly they want to get $64/bbl from the export market, rathern than $11/bbl worth of internal value by making electricity with it.
That's one driver that is too small to control oil prices on its own, but is a driver that is even happy building solar to "create" oil all the way down to $20/bbl.
Who in the oil production market today is still happy producing and selling oil if it generates $20/bbl?
