Long term OIL

[deisik]

So we are basically back to square one as I assumed

And with cheap oil no longer available (there were rumors that Saudi Arabian oil reserves are close to being depleted, but these may just be only rumors) and with their wealth funds running dry (and some part of them likely confiscated by the US courts), Saudi Arabia will get back where they had been before oil extraction started, i.e. returning to nomadic life in the desert breeding camels. But since their population has increased during the generous years of oil abundance and hefty prices, the typical outcome would likely be a devastating civil war inside this hornet nest of terrorism

I don't believe that the Saudi Arabian oil reserves are close to depletion. I have seen no proof to support such arguments. Aramco is still pumping oil at a very low cost. And also, the chances of wealth funds getting confiscated in the US is pretty remote. Both the GOP and Democrat politicians (including Trump) are having a favorable view of the Saudi Royal family. But I agree that the rapidly booming population is a major concern. It is just a matter of time before a major unrest is triggered in the kingdom

This is not a matter of belief or disbelief

But we don't have another choice but guesstimate only since the the KSA royal family won't let anyone know the real situation over the state of their oil fields for certain. In any case, we shouldn't expect them to admit it if the oil reserves were actually near depletion. That said, it would make sense for them to go for privatization of the oil sector (e.g. by turning Aramco into a public company) if it were so and they could successfully evade the audit procedures required in such case at that. Regarding confiscation of their wealth funds, just a few days ago I read about new court filings against Saudi Arabia being involved in the September 11 attacks. What previous cases ended with? Did anyone receive compensation from the KSA government?

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[bryant.coleman]

So we are basically back to square one as I assumed

And with cheap oil no longer available (there were rumors that Saudi Arabian oil reserves are close to being depleted, but these may just be only rumors) and with their wealth funds running dry (and some part of them likely confiscated by the US courts), Saudi Arabia will get back where they had been before oil extraction started, i.e. returning to nomadic life in the desert breeding camels. But since their population has increased during the generous years of oil abundance and hefty prices, the typical outcome would likely be a devastating civil war inside this hornet nest of terrorism

I don't believe that the Saudi Arabian oil reserves are close to depletion. I have seen no proof to support such arguments. Aramco is still pumping oil at a very low cost. And also, the chances of wealth funds getting confiscated in the US is pretty remote. Both the GOP and Democrat politicians (including Trump) are having a favorable view of the Saudi Royal family. But I agree that the rapidly booming population is a major concern. It is just a matter of time before a major unrest is triggered in the kingdom

This is not a matter of belief or disbelief

But we don't have another choice but guesstimate only since the the KSA royal family won't let anyone know the real situation over the state of their oil fields for certain. In any case, we shouldn't expect them to admit it if the oil reserves were actually near depletion. That said, it would make sense for them to go for privatization of the oil sector (e.g. by turning Aramco into a public company) if it were so and they could successfully evade the audit procedures required in such case at that. Regarding confiscation of their wealth funds, just a few days ago a read about new court filings against Saudi Arabia being involved in the September 11 attacks. What previous cases ended with? Did anyone receive compensation from the KSA government?

The Aramco was originally owned by the American corporations. The Saudis acquired a stake for the first time in 1973, when they got 25% of the shares in the company. The next year, they increased the stake to 60%, and by 1980, the company was fully under their ownership. Rough estimates of the oil reserves are available when the company was still owned by the Americans (i.e before 1973). They are in sync with the current projection of reserves.

[deisik]

So we are basically back to square one as I assumed

And with cheap oil no longer available (there were rumors that Saudi Arabian oil reserves are close to being depleted, but these may just be only rumors) and with their wealth funds running dry (and some part of them likely confiscated by the US courts), Saudi Arabia will get back where they had been before oil extraction started, i.e. returning to nomadic life in the desert breeding camels. But since their population has increased during the generous years of oil abundance and hefty prices, the typical outcome would likely be a devastating civil war inside this hornet nest of terrorism

I don't believe that the Saudi Arabian oil reserves are close to depletion. I have seen no proof to support such arguments. Aramco is still pumping oil at a very low cost. And also, the chances of wealth funds getting confiscated in the US is pretty remote. Both the GOP and Democrat politicians (including Trump) are having a favorable view of the Saudi Royal family. But I agree that the rapidly booming population is a major concern. It is just a matter of time before a major unrest is triggered in the kingdom

This is not a matter of belief or disbelief

But we don't have another choice but guesstimate only since the the KSA royal family won't let anyone know the real situation over the state of their oil fields for certain. In any case, we shouldn't expect them to admit it if the oil reserves were actually near depletion. That said, it would make sense for them to go for privatization of the oil sector (e.g. by turning Aramco into a public company) if it were so and they could successfully evade the audit procedures required in such case at that. Regarding confiscation of their wealth funds, just a few days ago a read about new court filings against Saudi Arabia being involved in the September 11 attacks. What previous cases ended with? Did anyone receive compensation from the KSA government?

The Aramco was originally owned by the American corporations. The Saudis acquired a stake for the first time in 1973, when they got 25% of the shares in the company. The next year, they increased the stake to 60%, and by 1980, the company was fully under their ownership. Rough estimates of the oil reserves are available when the company was still owned by the Americans (i.e before 1973). They are in sync with the current projection of reserves

And how much oil do they have remaining?

Just because these projection are in line with the oil production by Saudi Arabia (provided they were correct in the first place at all), it doesn't mean that their oil deposits are not close to depletion, right? In fact, they may well be. Apart from that, how can we be so sure that this info is real and truthful? I don't deny that there can be realistic and reliable data regarding the issue in question, but are we allowed to know it as well as  being told the whole thing and not half-truths (which are often worse than outright lies)?

[bryant.coleman]

And how much oil do they have remaining?

Just because these projection are in line with the oil production by Saudi Arabia (provided they were correct in the first place at all), it doesn't mean that their oil deposits are not close to depletion, right? In fact, they may well be. Apart from that, how can we be so sure that this info is real and truthful? I don't deny that there can be realistic and reliable data regarding the issue in question, but are we allowed to know it as well as  being told the whole thing and not half-truths (which are often worse than outright lies)?

No one can be quite sure about the health of the Saudi oil reserves. But my guess is that if the reserves are close to depletion, then the Saudis might have struggled to increase their output during 2014/15, when they crashed the prices by rapidly ramping up the production. If I am not wrong, they increased the output by close to 15% in just 12 months duration.

[yoseph]

The oil industry is slowing crippling and eventually, it will collapse completely. The oil producing countries are each trying to cover their losses and are drilling more and more to make more money and this is the exact reason why the prices are going up. They should all lower the number of barrels a day and stablize the price of oil.

[deisik]

The oil industry is slowing crippling and eventually, it will collapse completely. The oil producing countries are each trying to cover their losses and are drilling more and more to make more money and this is the exact reason why the prices are going up. They should all lower the number of barrels a day and stablize the price of oil.

The exact reason why the prices are going up?

Are you sure that you didn't miss something in your reasoning? How can possibly prices go up (as they seem to be doing for the last few days) if the oil producing countries are drilling more and more (wells) to cover their losses. common sense basically tells us the prices should actually decline, not rise. Though I agree that oil is likely going to decline below 50 dollars per barrel in the long run (mostly due to fracking technology improving)

[jaysabi]

Saudi are now making the barren desert into a rich fertile land with the use of irrigation and they wanted to be food independent rather than relying on imports alone. Aside from that they are also developing other business to make Saudi a more competitive country.

Is this some sort of a joke? The Saudis exhausted their water reserves in the late 1980s, after using all of it to farm wheat. Right now, they have hardly any water for irrigation. And water from desalination is extremely expensive (in Israel, the rate is around $0.50 per cubic meter, but in Saudi it costs two times that). For irrigation, you need water at less than $0.05 per cubic meter

I don't really know the economics behind such form of agriculture

So take my words with a grain of salt (pun intended). Basically, they have plenty of sun and that means they could produce cheap solar electricity and thus lower the costs of water desalination significantly (or build a few nuclear power plants with this purpose in mind). On the other hand, the whole idea of sustaining some form of agriculture in what otherwise is essentially a desert doesn't look very appealing overall. They could just pour their dollars (while they still have them) into something else

As far as I know, only around 35% to 40% of the costs associated with desalination comes from the usage of electricity. The remainder is taken up by the cost of the membranes and manpower. And solar panels are very expensive (and require constant maintenance) right now, which dilutes their advantage of having a vast open desert.

So we are basically back to square one as I assumed

And with cheap oil no longer available (there were rumors that Saudi Arabian oil reserves are close to being depleted, but these may just be only rumors) and with their wealth funds running dry (and some part of them likely confiscated by the US courts), Saudi Arabia will get back where they had been before oil extraction started, i.e. returning to nomadic life in the desert breeding camels. But since their population has increased during the generous years of oil abundance and hefty prices, the typical outcome would likely be a devastating civil war inside this hornet nest of terrorism

This is news to me, I haven't seen anyone before say Saudi Arabia was close to running dry on oil. I don't particularly believe it due to how pervasive the conception of the opposite is. Especially given that Saudi Arabia has been flooding the market recently to protect market share. If they were close to depletion, market share wouldn't be their main concern, maximizing what revenue remains in the ground would be before it's gone.

[jaysabi]

(there were rumors that Saudi Arabian oil reserves are close to being depleted, but these may just be only rumors)

In general the opposite is true of the area.  Iran and Iraq have not received much recent development in their oil assets and have been cut off from modern development for decades almost. Its probable that Iraq exceeds Saudi in their reserves but does not have the infrastructure to access or transport in the way that their neighbours can do so cheaply.  
Obviously we have a war ongoing in Iraq still, the stability to gain the oil is not there but they arent in theory running out of it in potential.

There are no theory of running out of oil but eventually it will finished that is why in the future oil will become more and more expensive but for now the stock is still enough and the world already create subtitution to decrease the oil usage

We all know that the overall supply of crude is limited, but inventories are swelling at the moment.
This is pushing the price down.
http://www.cnbc.com/2017/03/21/oil-prices-fall-on-bloated-us-crude-storage.html

It is kind of silly that prices move in response to one data point like this. It just so happens that the US is the only country for which reliable inventories are available, but the US represents only about 20% of world oil consumption. Trading based on this single data point ignores the other 80% of the picture, but traders gonna trade I guess.

[deisik]

Saudi are now making the barren desert into a rich fertile land with the use of irrigation and they wanted to be food independent rather than relying on imports alone. Aside from that they are also developing other business to make Saudi a more competitive country.

Is this some sort of a joke? The Saudis exhausted their water reserves in the late 1980s, after using all of it to farm wheat. Right now, they have hardly any water for irrigation. And water from desalination is extremely expensive (in Israel, the rate is around $0.50 per cubic meter, but in Saudi it costs two times that). For irrigation, you need water at less than $0.05 per cubic meter

I don't really know the economics behind such form of agriculture

So take my words with a grain of salt (pun intended). Basically, they have plenty of sun and that means they could produce cheap solar electricity and thus lower the costs of water desalination significantly (or build a few nuclear power plants with this purpose in mind). On the other hand, the whole idea of sustaining some form of agriculture in what otherwise is essentially a desert doesn't look very appealing overall. They could just pour their dollars (while they still have them) into something else

As far as I know, only around 35% to 40% of the costs associated with desalination comes from the usage of electricity. The remainder is taken up by the cost of the membranes and manpower. And solar panels are very expensive (and require constant maintenance) right now, which dilutes their advantage of having a vast open desert.

So we are basically back to square one as I assumed

And with cheap oil no longer available (there were rumors that Saudi Arabian oil reserves are close to being depleted, but these may just be only rumors) and with their wealth funds running dry (and some part of them likely confiscated by the US courts), Saudi Arabia will get back where they had been before oil extraction started, i.e. returning to nomadic life in the desert breeding camels. But since their population has increased during the generous years of oil abundance and hefty prices, the typical outcome would likely be a devastating civil war inside this hornet nest of terrorism

This is news to me, I haven't seen anyone before say Saudi Arabia was close to running dry on oil. I don't particularly believe it due to how pervasive the conception of the opposite is. Especially given that Saudi Arabia has been flooding the market recently to protect market share. If they were close to depletion, market share wouldn't be their main concern, maximizing what revenue remains in the ground would be before it's gone

I tend to disagree that they couldn't be flooding the market

Basically, I have no access to the data how much oil they have in their reserves left, and I guess no one here does, if anyone at all (apart from the KSA royal family, of course). These were just rumors, after all (though they have been circulating for quite some time now). Other than that, there are quite a few things in the world which are totally counterintuitive at first glance (close to incomprehensible) while at some deeper level they are quite logical and rational. For example, Saudi Arabia might be flooding the market with cheap oil like mad even if their oil reserves were near depletion because it would still be more economically justified. We could have even lower oil prices when Iran started to produce crude oil at their full capacity in a few years after upgrading their oil extracting infrastructure

[Sithara007]

The oil industry is slowing crippling and eventually, it will collapse completely. The oil producing countries are each trying to cover their losses and are drilling more and more to make more money and this is the exact reason why the prices are going up. They should all lower the number of barrels a day and stablize the price of oil.

That's what they have done. Saudi Arabia has cut production by some 600,000 barrels a day. Russia has also cut their output by some 200,000 barrels (they are aiming for a reduction of 300,000 bpd). Other nations such as Kuwait and Angola have also lowered their output.

[Idrisu]

Oil won't go up these next years because of the economic recession that is preparing and will soon hit the world

But due to the war and activities of Isis in meddle east the price of oil is craping up little by little. Recession though has have negative infect on oil  but I do believe that price could have still be up if not Saudi Arabian prince's comment to make sure oil fell below $50 par barrier.

[jaysabi]

Saudi are now making the barren desert into a rich fertile land with the use of irrigation and they wanted to be food independent rather than relying on imports alone. Aside from that they are also developing other business to make Saudi a more competitive country.

Is this some sort of a joke? The Saudis exhausted their water reserves in the late 1980s, after using all of it to farm wheat. Right now, they have hardly any water for irrigation. And water from desalination is extremely expensive (in Israel, the rate is around $0.50 per cubic meter, but in Saudi it costs two times that). For irrigation, you need water at less than $0.05 per cubic meter

I don't really know the economics behind such form of agriculture

So take my words with a grain of salt (pun intended). Basically, they have plenty of sun and that means they could produce cheap solar electricity and thus lower the costs of water desalination significantly (or build a few nuclear power plants with this purpose in mind). On the other hand, the whole idea of sustaining some form of agriculture in what otherwise is essentially a desert doesn't look very appealing overall. They could just pour their dollars (while they still have them) into something else

As far as I know, only around 35% to 40% of the costs associated with desalination comes from the usage of electricity. The remainder is taken up by the cost of the membranes and manpower. And solar panels are very expensive (and require constant maintenance) right now, which dilutes their advantage of having a vast open desert.

So we are basically back to square one as I assumed

And with cheap oil no longer available (there were rumors that Saudi Arabian oil reserves are close to being depleted, but these may just be only rumors) and with their wealth funds running dry (and some part of them likely confiscated by the US courts), Saudi Arabia will get back where they had been before oil extraction started, i.e. returning to nomadic life in the desert breeding camels. But since their population has increased during the generous years of oil abundance and hefty prices, the typical outcome would likely be a devastating civil war inside this hornet nest of terrorism

This is news to me, I haven't seen anyone before say Saudi Arabia was close to running dry on oil. I don't particularly believe it due to how pervasive the conception of the opposite is. Especially given that Saudi Arabia has been flooding the market recently to protect market share. If they were close to depletion, market share wouldn't be their main concern, maximizing what revenue remains in the ground would be before it's gone

I tend to disagree that they couldn't be flooding the market

Basically, I have no access to the data how much oil they have in their reserves left, and I guess no one here does, if anyone at all (apart from the KSA royal family, of course). These were just rumors, after all (though they have been circulating for quite some time now). Other than that, there are quite a few things in the world which are totally counterintuitive at first glance (close to incomprehensible) while at some deeper level they are quite logical and rational. For example, Saudi Arabia might be flooding the market with cheap oil like mad even if their oil reserves were near depletion because it would still be more economically justified. We could have even lower oil prices when Iran started to produce crude oil at their full capacity in a few years after upgrading their oil extracting infrastructure

If you're close to depletion though, what short term benefit are you realizing by flooding the market now and realizing less revenue in the midterm? Saudi Arabia is not a diversified economy, and if they're close to depletion they are setting themselves up for great economical and political instability in the near future. It's possible as you say, but I wouldn't bet on it. 

[jaysabi]

The oil industry is slowing crippling and eventually, it will collapse completely. The oil producing countries are each trying to cover their losses and are drilling more and more to make more money and this is the exact reason why the prices are going up. They should all lower the number of barrels a day and stablize the price of oil.

That's what they have done. Saudi Arabia has cut production by some 600,000 barrels a day. Russia has also cut their output by some 200,000 barrels (they are aiming for a reduction of 300,000 bpd). Other nations such as Kuwait and Angola have also lowered their output.

Of course, take the self-reported "cuts" with a grain of salt. What they report they do and what they actually do is not likely the same thing, especially with so much incentive to cheat and no independent body to verify anything they say. Saudi Arabia has publicly acknowledged in the past that everybody in OPEC lies about production numbers.

[STT]

Saudi Arabia is least likely and least able to cheat on their agreed production numbers, as the largest member of OPEC it becomes blatantly obvious when they are over producing oil.     The most likely cheats in any scheme will be the smallest more remote producers who may give oil to energy users in their own country for political reasons to lower electricity cost and win voter support or similar schemes.   One of the more obvious countries that happened was Venezuela where oil is given very cheaply to the people, many 'illegal' exports occur in that cheap fuel to neighbouring countries

There is no shortage of oil resource, its a question of cost to extract and ease of access.  Iran has problems requiring engineering resource which leads to higher cost for them, mainly they lack investment and its sometimes true of other large countries like Russia.

The other end of the chain is demand which remains lower then it should be for years, world growth should be greater

[deisik]

I tend to disagree that they couldn't be flooding the market

Basically, I have no access to the data how much oil they have in their reserves left, and I guess no one here does, if anyone at all (apart from the KSA royal family, of course). These were just rumors, after all (though they have been circulating for quite some time now). Other than that, there are quite a few things in the world which are totally counterintuitive at first glance (close to incomprehensible) while at some deeper level they are quite logical and rational. For example, Saudi Arabia might be flooding the market with cheap oil like mad even if their oil reserves were near depletion because it would still be more economically justified. We could have even lower oil prices when Iran started to produce crude oil at their full capacity in a few years after upgrading their oil extracting infrastructure

If you're close to depletion though, what short term benefit are you realizing by flooding the market now and realizing less revenue in the midterm? Saudi Arabia is not a diversified economy, and if they're close to depletion they are setting themselves up for great economical and political instability in the near future. It's possible as you say, but I wouldn't bet on it

I wouldn't bet on that either

But they might know something which we don't. For example, it would make sense to sell oil at any price if they desperately needed money, even if their oil reserves were close to depletion. After all, oil is still almost free for them (the cost of extraction is something like a few dollars per barrel). Yes, they had something like 600B dollars in wealth funds, but these funds are mostly in US treasuries (read they are controlled by the US government), so they can't simply convert them to dollars and take the proceeds. By the way, does anyone know how much they have in their funds by now?

[Sithara007]

Of course, take the self-reported "cuts" with a grain of salt. What they report they do and what they actually do is not likely the same thing, especially with so much incentive to cheat and no independent body to verify anything they say. Saudi Arabia has publicly acknowledged in the past that everybody in OPEC lies about production numbers.

I don't know much about the other nations, but this time the Saudis were quite determined to reduce the global supply of crude oil. They took the initiative, and brought the non-OPEC nations such as Russia to the negotiation table. It is unlikely that they will cheat this time around.

[wuvdoll]

Saudi Arabia is least likely and least able to cheat on their agreed production numbers, as the largest member of OPEC it becomes blatantly obvious when they are over producing oil.     The most likely cheats in any scheme will be the smallest more remote producers who may give oil to energy users in their own country for political reasons to lower electricity cost and win voter support or similar schemes.   One of the more obvious countries that happened was Venezuela where oil is given very cheaply to the people, many 'illegal' exports occur in that cheap fuel to neighbouring countries

There is no shortage of oil resource, its a question of cost to extract and ease of access.  Iran has problems requiring engineering resource which leads to higher cost for them, mainly they lack investment and its sometimes true of other large countries like Russia.

The other end of the chain is demand which remains lower then it should be for years, world growth should be greater

I think with the war going on in the middle east and north Africa, and the production of oil in some of the important countries stopping, the prices of oil are gradually getting higher, the supply of the black gold is not shortened because we only use cheap oil, not the high quality oil that the countries of the OPEC have, but over time the supply will go down and we will witness a high demand leading to high price.

[deisik]

Saudi Arabia is least likely and least able to cheat on their agreed production numbers, as the largest member of OPEC it becomes blatantly obvious when they are over producing oil.     The most likely cheats in any scheme will be the smallest more remote producers who may give oil to energy users in their own country for political reasons to lower electricity cost and win voter support or similar schemes.   One of the more obvious countries that happened was Venezuela where oil is given very cheaply to the people, many 'illegal' exports occur in that cheap fuel to neighbouring countries

There is no shortage of oil resource, its a question of cost to extract and ease of access.  Iran has problems requiring engineering resource which leads to higher cost for them, mainly they lack investment and its sometimes true of other large countries like Russia.

The other end of the chain is demand which remains lower then it should be for years, world growth should be greater

I think with the war going on in the middle east and north Africa, and the production of oil in some of the important countries stopping, the prices of oil are gradually getting higher, the supply of the black gold is not shortened because we only use cheap oil, not the high quality oil that the countries of the OPEC have, but over time the supply will go down and we will witness a high demand leading to high price

Welcome to the brave new world, mate!

How much time have you spent being frozen, a decade or two? The largest consumer of crude oil is the US, and they have more than enough reserves of their own oil, while the domestic production has been on the rise for the last few years. The US Congress even allowed exporting oil after a few decades of ban. It is quite possible that in a decade the US will turn from net importer into net exporter of crude oil. China, the second largest oil importer, can easily substitute Saudi Arabian oil with Russian and Iranian oils, which they have been already doing, anyway. In this way, it is unlikely that we are going to "witness a high demand leading to high price" due to tensions in the Middle East and Northern Africa any time soon

[guy_wonderful]

Global Oil Demand Can Only Increase
https://www.forbes.com/sites/judeclemente/2016/08/28/global-oil-demand-can-only-increase/#7605725531a0

Kinda liked the article when saw it for first time.

[michnelli6]

If you're close to depletion though, what short term benefit are you realizing by flooding the market now and realizing less revenue in the midterm? Saudi Arabia is not a diversified economy, and if they're close to depletion they are setting themselves up for great economical and political instability in the near future. It's possible as you say, but I wouldn't bet on it. 

Well what I think is it is all about the international forum of OPEC. Only Saudi Arabia is not capable of doing all the things on its own. By lowering the prices of oil it only can make its economy down worth. I guess there are certain other elements involved in it that drags the oil prices downwards. Otherwise no one will like to generate less revenue instead of having a chance to get higher.