17:57 GMT +3 hours30 July 2016
Live
Khaled al Otaiby, an official of the Saudi oil company Aramco watches progress at a rig at the al-Howta oil field.

Riyadh's Worst Nightmare: Is Saudi Arabia's Oil Business Going Bust?

© AP Photo/ JOHN MOORE
Politics
Get short URL
209726527

"What if Riyadh’s oil wealth days are numbered?" American political analyst Phil Butler asks, shedding light on what "peak oil" means for the Western economy.

Saudi aggression against Yemen and the much discussed Saudi-Turkish initiative to kick off a ground operation in Syria are clear signs that Riyadh is in trouble.

"Saudi Arabia's ever increasingly hostile stance toward neighbors may not be as secular as some have suggested. Given the nature of the country's oil reserves, and almost unlimited production for decades, it's possible the Saudis could simply be running out of gas," US political analyst Phil Butler writes in his article for New Eastern Outlook.

The current oil slump has dealt a heavy blow to Saudi Arabia's economy, the analyst notes, adding that Riyadh has nothing but oil to rely on.

"New projects like the lavish architectural creations looming in the deserts have halted, the Saudis are not happy people like they were," Butler points out.

What makes matters even more complicated is that the Ghawar Field, the world's largest oil field, is running out after about 65 years of continuous production and the Saudi Aramco is due to start the CO2-EOR process to extract the last of the field's oil, the analyst stresses.

"Once this happens, Saudi Arabia will return to an almost medieval third world status. Either this or those billions horded by Saudi princes will have to be used to placate or to subdue the people," he remarks.

And it's not a mere speculation.

Back in 2012, an analytical report by Citigroup Inc. stated that Saudi Arabia risks becoming an oil importer by 2030.

"If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030," Citigroup analyst Heidy Rehman wrote, as quoted by Bloomberg.

An Asian worker covers his face to protect it from the dust and the blazing sun at the site of Saudi Aramco's (the national oil company) Al-Khurais central oil processing facility under construction in the Saudi Arabian desert, 160 kms east of the capital Riyadh (File)
© AFP 2016/ MARWAN NAAMANI
An Asian worker covers his face to protect it from the dust and the blazing sun at the site of Saudi Aramco's (the national oil company) Al-Khurais central oil processing facility under construction in the Saudi Arabian desert, 160 kms east of the capital Riyadh (File)

In light of the ongoing oil competition between US shale oil producers and Saudi crude extractors the prospect of Riyadh's "running out of gas" looks real.

"Furthermore, a recent WikiLeaks revelation cited a warning from a senior Saudi government oil executive telling that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels, or by nearly 40%!" the American political analyst underscores.

Butler refers to a phenomenon called "peak oil." According to M. King Hubbert‘s theory, peak oil is the point in time when the maximum rate of extraction of petroleum is reached and the crude capacity will only decline.

Whether one likes it or not, peak oil has been reached, the analyst underscores.

However, while the global oil reserves are decreasing steadily, Riyadh has been pumping its crude faster than anyone.

And here is the root cause of Saudi Arabia's warmongering. To maintain its status quo, the Saudi kingdom has established an alliance with Turkey, planning to seize Syria and Iraq's oil fields.

Still, it's only half the story, since the global economy also remains petroleum-centered.

"Where Americans' interests are concerned, while President Obama has been parlaying trendy terms like 'renewable energy' and his supposed climate change agenda, the fact is petroleum still powers 96% of all transportation in America," Butler emphasizes.

To paraphrase the old song, oil makes the world go round…

The question then arises, whether we are on the doorstep of new "energy wars."

Related:
Did the Saudis Just Win? 5 Signs That the Oil Crisis May Be Over
'Deeply Into Debt': Saudi Arabia Nearing Massive Cash Deficits
Saudi Arabia's Oil Freeze May Be More Political Than Business-Driven
Tags:
falling oil prices, oil, economy, The Syrian war, Saudi Aramco, Citigroup, Barack Obama, Syria, United States, Saudi Arabia, Yemen
Community standardsDiscussion
Comment via FacebookComment via Sputnik
  • Сomment

All comments

  • siberianhusky
    Yes let's put more sanctions on Russia. IDIOTS!!!!!!!
  • dvdgrg09
    Another Bill Phutler word salad, shotgun style -- cover enough topics and something will stick. What stuck? The world needs oil. Well done. The US has been an energy security state for decades now, what else is new? Russia in the catbird seat, maybe, if it can withstand the rays of hatred propagating from the west.
  • jas
    I don't think it's the oil business as much as the royal family in decline. Saudi Arabia would be in a much stronger position with different leaders. The fiascoes in Syria and Yemen should never have happened.
  • uranus.hertz
    Since 2000, Saudi has known oil was on the way out the door. After all, the stone age didn't end because there weren't enough stones lying around ... something better happened. So they've been ever so surely moving towards selling off as much oil as possible before they get stuck with stranded assets ... assets no one is willing to purchase. And the proceeds are being funneled into research into taking all that empty desert and turning it into one big solar power generating plant. What's more they know the industrial nations are usy trying to create a fussion-fission reactor that will generate electrical energy on the same level as the Sun. In fact, China plans to break ground in 2020 with an expected completion date in 2030, which happens to be the target sate the Saudi's believe the global demand for oil to dry up.
  • Mitach2002
    My hope is the royal family suffers. Maybe they'll be caught before they run with all the nations money.
  • innocappuccinnoin reply touranus.hertz(Show commentHide comment)
    uranus.hertz, we are not out of stones, but we are out of one most important stone - Earth. you see, we are already out of planets. so it may as well be out of oil. you just use prefabricated thoughts of not very smart people. you see, dollars are like stones, you are never out of that. oil is not like stones or dollars, oil is like unreplaceable and unmultipliable home planets. you see, i am the smart now, you could as well use my thoughts from now on, if you are unable to produce some of your own...
  • Ivan Buckeye
    Peak oil in the middle east is the cause of the wars waged since 2001, no doubt. If all was well with oil resources there wouldn't be this scramble to rearrange the middle east or encircle Russia and contain China. There's a war on for gaining control and access to oil but the locations of where the oil is isn't in the old, drained-out places it used to be. Germany was starved of oil and Japan was locked out too...look how that worked out in the fomenting WWII. We are in the midst of a global resource battle in no uncertain terms.
  • uranus.hertzin reply toinnocappuccinno(Show commentHide comment)
    innocappuccinno, .... tell me, how it feels to be so blissfully free from the ravages of intelligence.

    " ... In 2000, Sheikh Ahmed Zaki Yamani, former oil minister of Saudi Arabia, gave an interview in which he said:

    “Thirty years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil ...”

    Source - www.energypost.eu/historic-moment-saudi-arabia-sees-end-oil-age-coming-opens-valves-carbon-bubble
  • uranus.hertzin reply toIvan Buckeye(Show commentHide comment)
    Ivan Buckeye, the Saudia's are dumping oil because they see something at the edge of the horizon coming at them that will change the global energy dynamic ... fussion-fission reactors. China plans to start construction on one in 2020 to be completed by 2030, which happens to be the time line Saudi sees as the demand for oil dying off. However, they do plan to heavily invest in solar collection arrays ... they have a lot of uninhabited land mass.
  • innocappuccinnoin reply toIvan Buckeye(Show commentHide comment)
    Ivan Buckeye, you are ... almost right, but not right there yet. Not the peak of oil is the cause of war, but THE PEAK OF NON-US CONTROLLED OIL! if the oil on sell would all be US oil, then US would make little to no war, if any.
  • innocappuccinnoin reply touranus.hertz(Show commentHide comment)
    uranus.hertz, let me translate that for your little brain and the inadequate excuse for no personality of yours: "we, the saudi, get 5% of the price for our oil in peace time, the rest is never payed by US. in the war time, they give us 10% or more, but the difference under condition to place that difference in war investments. we falsely predict, truly transmit an order, that the time is comming when US would ask for all the oil they need without paying a dollar. we tell you that they would call that market price, but in fact is a no pay dirrective. they will do that when they will observe their bellow any expectation shale reserves. then they will say that the oil worths nothing because of those who want to ruin their shale oil industry, which is a 10% reality and 90% myth, or even worst". Also Sheikh Ahmed Zaki Yamani truthfuly told i am inexplicably blissfully free from the ravages of missinformations launched by western intelligence services, and that you are just too lazy and read and write half of the words"
  • innocappuccinnoin reply touranus.hertz(Show commentHide comment)
    uranus.hertz, you cannot get energy from fusion. it is very tricky (why, not how) and it would be of no use to debate here. You just need to ask an thermonuclear bomb physicist, one could explain it to you in the best way. he needs not to explore speculating possibilities, he will just show it to you, exactly how, and exactly what is the price of getting the thermonuclear explosion. My best guess is that the production of energy through fusion needs the same in thermo and cold reaction. Let me ask you one thing: what kind of fusionb do you think it is in the Sun, warm or cold? I believe it is COLD FUSION. What do you think about this? That i am blissfully ignorant? Or that i am not yet aware the UFO rely on cold fusion? buah-ha-ha!
  • Ivan Buckeyein reply toinnocappuccinno(Show commentHide comment)
    innocappuccinno, you need to reread what I wrote because you just made the point I made.
  • innocappuccinno
    Ivan Buckeye, i am aware, and i was not against you here. What i am saying here is that the peak of oil is not the engine of the war, nor even of the fall in price. Now read carefuly: if the oil would be under USA control (meaning most of the oil production), we would have (inexplicable only on the surface of the applated brains) also A PEAK OF PRICE. My idea here is that the ballance of offer and demand is not truly a drive for the prices. A drop in price happens when those in power over money are not in power of the resources. A spike in prices happens when those in power over money are also in power over resources. What we have now in the world is the best proof USA is in DECLINE. They still can mask that in many different ways, but they lose grip on 50+ % of the resources. The prices cannot go up till Russia *privatizes its resources (we speak here in %). Prices were up before not because that was low offer and high demand. Prices were up because most of the gas and oil from Russia were under US patronage. Under Eltsyn less that 5% of money were ever payed for the russian oil and gas. The prices were up because the offerer was USA. they gave Russian oil and gas and took their own money back 95%. It was simulation of payment. Now the prices dropped not because they wage economic war against Russia, even though the economic war is real, but think about it like this: The percentages of the payments Putin took back, exactly those money are now the *drop in prices. Russia is not gaining yet. Though i predict Russia will gain most of it soon. The you must think how US will lose. I predict they will scrap for metal half of their nuclear powerred carriers.
  • Marc Nonnenkamp
    It makes perfect sense. Most areas of the world which rely on energy reserves to fund their economies were poor before crude oil and natural gas were discovered, and they've merely been taking it for granted since then. In other words, they have little or no other economic activity, which is very poor personal planning.
Show new comments (0)
Top stories