DrumBeat: January 31, 2008
Posted by Leanan on January 31, 2008 - 8:48am
Topic: Miscellaneous
Western majors feel the squeeze
Daniel Yergin, the chairman of Cambridge Energy Research Associates and author of The Prize, a history of the oil industry, argues that this is one of the toughest times for oil companies since the wave of nationalisations in the 1970s.“The irony is that the other challenging times were when the oil price was low,” he says. “Now it is because oil has gone to $100 [a barrel].”
...Yet Jeroen van der Veer, Shell’s chief executive, mounted a vigorous defence of the oil majors’ business model on Thursday, arguing that in the future, conditions will favour the big western companies.
The industry’s production figures have been disappointing in part because of the high oil price in countries where companies operate under production-sharing contracts. As the price rises, the contracts generally give the country a greater share of any oil produced.
This has exacerbated the fundamental problem: that the oil and gas resources in the international companies’ traditional bases in the US and Europe are running out, while getting access to the still-abundant resources of the Middle East, Africa, and South America has become more difficult.
The hedge fund manager who bought a farm
The cost of farm property looks likely to soar as traditional British “lifestyle farmers” are joined by multimillion-pound investors hurriedly moving their wealth out of stocks and shares and into farmland. Across the world, hedge fund managers, property developers and other investors are turning their eyes to places such as Russia, Argentina and Uruguay, where farms are thought to be underdeveloped and provide an opportunity to profit from the rising prices of staples such as wheat, barley and oil-seed rape.
Cheap cars in Asia, expensive gas everywhere
NEW YORK (CNNMoney.com) -- The debut of the $2,500 car may be billed as a mobility breakthrough for billions of people in the developing world, but for U.S. motorists it could mean one thing: higher gas prices.Rising demand from the developing world has long been cited as a main driver behind the runup in oil prices. That demand will only get more intense with staggering growth in car sales - and by extension, gasoline use - in places like India and China.
"We'll get into a situation where we'll have to compete with them for gasoline, $4, $5 a gallon, who knows how high we could go." said Peter Beutel, an oil analyst at the consultancy Cameron Hanover.
IN THEORY, the Bolivarian Alternative for the Americas, better known as ALBA, is a Venezuelan-led trade pact based on the principle of “solidarity”. Set up three years ago by Cuba's leader, Fidel Castro, and his close ally, Hugo Chávez of Venezuela, it rejects the free-trade model of integration espoused by the United States. Many have dismissed it as a group of client states, sustained by Venezuelan oil money. Now Mr Chávez wants to turn it into a mutual defence pact that would protect its members from attack by the United States or its ally, Colombia.
Dems, Republicans equally green
Political party affiliation has little bearing on the number of “green” actions people take, a new study by Porter Novelli and George Mason University shows. According to the survey of more than 11,000 American adults and nearly 1,000 of their children, Democrats and Republicans differ only slightly when it comes to taking actions to protect the environment, despite great differences in their perceptions of danger related to global warming.
OPEC says more oil won't help world economy
VIENNA (Reuters) - OPEC on Thursday looked set to rebuff consumer calls for more crude, saying it was powerless to help stave off recessionary pressures in the West.Enjoying a sixth year of crude price gains, the Organization of the Petroleum Exporting Countries argues it can do little to help avoid a slowdown in the United States, its leading customer, that could curtail demand for the cartel's oil.
"I don't see what increasing supply of oil will do to the economy, psychologically maybe it would help but I doubt it," said OPEC President Chakib Khelil ahead of Friday's 0900 GMT meeting.
Can OPEC fend off a recession with its moves on oil?
Mr. Stuart thinks OPEC supplies will have to rise by 1.3 million barrels per day this year, but that this won’t begin for some time. The group’s members – agreeing to cut output back in October 2006 – reduced production by 700,000 barrels in 2007.“But with crude oil inventories near normal; margins poor and refinery runs in North America and Europe falling seasonally from January through April, key exporters are more likely to reduce crude oil supplies first,” the economist said.
Approximately eight out of 10 of those surveyed feel the government isn’t doing nearly enough to deal with the energy crisis, while a solid majority feel that oil companies are “gouging” consumers at the pump, said Hueber.Another 80 percent would support a new windfall tax on energy industry profits – as long as the proceeds are funneled into research that would result in improved energy efficiency and reduced oil imports.
Shrinking margins, delays and exploration costs hurt Marathon Oil
HOUSTON — Oil and gas company Marathon Oil Corp. said Thursday that fourth-quarter earnings dropped 38 percent on margin pressure driven by rising crude-oil prices, project delays and higher exploration costs.
Russia FinMin says lower oil taxes not in sight
MOSCOW, Jan 31 (Reuters) - Russia may raise taxes on the gas industry but has no plans to cut them for the oil sector despite complaints from oil firms that they need more cash for investments, a government official said on Thursday.
Venezuela to pay $1 bln in Sincor takeover- source
CARACAS, Jan 31 (Reuters) - Venezuela will pay $1.1 billion in compensation to France's Total and Norway's Statoil for the takeover of the Sincor oil project, an industry source familiar with the agreement told Reuters on Thursday.Venezuelan President Hugo Chavez last year took over four multibillion-dollar heavy crude upgrading projects as part of a drive to create a socialist state, pushing Exxon Mobil Corp and ConocoPhillips out of the OPEC nation in the process.
Shell refineries to shut for maintenance in Q1
LONDON (Reuters) - Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research) said on Thursday it expected a drop in throughput at its refineries in the first quarter as planned maintenance is undertaken."Q1 is our heaviest turnaround period of the year, and we have planned outages at Deer Park, Convent and Pernis plus downtime at Clyde," Chief Financial Officer Peter Voser said on a call with analysts.
Despite strong opposition, this month Mexico’s government hiked taxes on gasoline in an effort to boost revenue following reforms of its state oil company Pemex.The gasolinazo, as the tax is called, will increase rates by a little over 5 percent. It is designed to offset the government’s loss in revenue from Pemex, which will be allowed to retain up to $3 billion more per year thanks to recent reforms.
Indian Oil unable to secure Algerian gas
Indian Oil Corp. Ltd (IOC), which planned to import liquefied natural gas (LNG) to meet growing demand for gas in India, has been unable to sign a deal for long-term supplies with Algeria, a setback that means the company cannot start work on its proposed regasification plant in Ennore near Chennai.
RACV: new player won't cut oil price
LEAD motoring group the RACV remains sceptical about the benefits of a "fifth force" in Australia's oil industry and says the only realistic way of cutting petrol prices is to cut tax."It's all about tax, the only way to bring about cheaper petrol is through tax reduction," spokesman David Cumming said yesterday.
Ford expands in S Africa despite blackouts
Ford Motor on Wednesday announced plans to expand its South African operations in spite of concerns over a worsening power crisis that may soon see it begin making vehicles by night.
S Africa set for month of blackouts
South Africa's parliament is set to hold an emergency session as people prepare for a month of blackouts due to severe power shortages.The energy crisis, which analysts fear could severely damage the economy, has prompted opposition parties to threaten to bring a motion of no confidence against Thabo Mbeki, the country's president.
"Prepare yourself for four weeks of hell" the headline in one South African newspaper read on Wednesday.
Uganda: Fuel Shortage Creeping Back
FUEL shortages that were earlier sparked by Kenya's sudden slide into chaos after the disputed December 27 poll are creeping back, with major dealers reporting fast dwindling stocks.Although the situation has not yet reached the early January crisis levels when a litre of petrol sold as high as Shs10,000, industry insiders yesterday expressed concerns that if supplies fail to improve, acute scarcities would soon set in.
Senate Bill Would Delay Alaska Lease Sale
Massachusetts Democrat John Kerry introduced Senate legislation yesterday that would scuttle petroleum lease sales in federal waters off Alaska's northern coast until the Interior Department determines whether polar bears should be listed under the Endangered Species Act.
Four provinces unite in emissions fight
VANCOUVER — The premiers of four provinces that account for more than half of Canada's greenhouse-gas emissions are pushing for an accord on an alternative national climate-change plan that would trump the Harper government's blueprint.British Columbia, Manitoba, Ontario and Quebec are forging ahead with talks aimed at establishing a market-based trading system to cut greenhouse- gas emissions. The premiers of Canada's two largest provinces said they have grown impatient waiting for other provinces, notably Alberta, to overcome their sharp differences, and for the federal government to take a leadership role in developing a cap-and-trade emissions system.
Climate Plans by New York, Florida Prod U.S. on Global Accord
(Bloomberg) -- President George W. Bush is pressing allies in Europe for a global warming agreement based on voluntary targets for pollution reduction. State officials in the U.S. have already left him behind.Twenty-two U.S. states with about 145 million people are exploring mandatory carbon-dioxide caps and emission-credit markets similar to one in the European Union. The proposals are pressuring Congress to pass legislation that would supersede the state and regional programs with a single national plan.
Jeremy Rifkin: A 'Third Industrial Revolution' is nigh
We are "at the last stage of an energy era", Jeremy Rifkin told EurActiv. The current energy system based on fossil energies will not last through the 21st century as oil prices surge and "peak oil" – the point of maximum oil production – will, according to him, be attained in 2030 at the latest."I don't know who's right, the optimists or the pessimists. But anyway, it will happen between 2010 and 2030, and it leaves a very small window," he said.
Cold Snap Wreaks Havoc on Central Asian Power
The worst winter in decades has hit Central Asia with one of the worst energy crises in memory, forcing factories to close and leaving people shivering in the darkness.Abnormally low seasonal temperatures, plunging to 30 or 40 degrees below zero, have pushed electric consumption to a record high.
In Kyrgyzstan, a state rich in hydroelectric power, daily consumption is ten per cent higher than it normally would be at this time of year. The jump in use caused water levels in the main reservoir at Toktogul to fall alarmingly as the turbines were kept running in an effort to keep up with demand.
In Tajikistan, which suffers from annual winter energy crises despite its substantial hydroelectric generating capacity, savage power cuts have inflicted severe damage on industrial output and raised questions about the competence of the political leadership.
Even energy-rich Kazakstan, Uzbekistan and Turkmenistan have experienced power cuts as sharply-rising domestic consumption overwhelms capacity.
Shell Cracking Under Cost Pressure
LONDON - Oil prices may be booming, but the strain of higher costs is beginning to show for Royal Dutch Shell.The Anglo-Dutch oil and gas stalwart posted a 60.4% increase in fourth-quarter profits Thursday, to $8.5 billion, from $5.3 billion, but most of the gain came from the jump in crude prices this year. Excluding price fluctuations and a $963 million gain from asset sales, net profit for the quarter came in at a more modest $5.7 billion.
Power crisis dents Gold Fields
Johannesburg - A 10% cut in electricity supply has a disproportionate effect on gold output because actual mining operations account for only 10% of total consumption, Terence Goodlace, head of Gold Fields' SA operations, told Thursday morning's briefing on the December quarterly.Mining groups have different profiles, as conditions vary from mine to mine depending on factors like depth, water pumping and ventilation/refrigeration requirements. But Gold Fields consumes just over 600MW at full operation.
A full third of this would still be needed if all the mines were mothballed, and about 350MW is what Gold Fields calls the base load that covers minimal pumping, ventilation and refrigeration.
Coal working group confident that Eskom emergency supplies will be found
There was no doubt that the 5,4-million tons of coal that was needed by Eskom within the next three months to ease the present energy crisis would be found, SA Eskom Coal Working Group chairperson Ben Magara told Mining Weekly Online on Thursday.In an interview, Magara explained that this 5,4-million tons would be supplied collectively by South African coal producers, who had committed themselves to meeting Eskom’s immediate needs and improving stockpiles at the affected stations to healthier levels.
South Africa: Go to sleep early to save power - minister
"Go to sleep earlier so that you can grow and be cleverer. Boil less water, use the microwave rather than stove, take a shower and not a shallow bath," was Minerals and Energy Minister Buyelwa Sonjica's advice to the country at a special joint parliamentary sitting to discuss the power crisis.She said that perpetual blackouts could be avoided if South Africans used power more responsibly.
President Musharraf wants early completion of energy projects
ISLAMABAD: President Pervez Musharraf on Wednesday directed all relevant ministers to complete small and midterm energy projects to overcome the energy crisis in the country. He also urged them to remove the hurdles concerning the construction of big dams.
Regarding "In a World Short of Oil, Provisions Must Be Made" (page one, Jan. 26), the fearful Aaron Wissner should be commended for his efforts to plan for the future, but I would also like to point out the shortsightedness of his plan. If he really believes in peak oil and a looming oil shock he should realize that selling his house and moving to the woods is not going to secure his future. If oil-dependent economies "crumble" and resource wars "explode," how does he propose to protect this little plot of land in the woods?
Friends of Coal Push New Message, Outreach
Steve Walker, president of Walker Machinery, said he was preaching to the choir at the Belle headquarters Jan. 30, but drove home the message of evolving clean coal by telling his employees, "This is not your grandfather's coal industry."Walker hosted a membership drive for Friends of Coal, a volunteer organization with the goal of informing and educating citizens about the coal industry and its role in the future of the state and the nation. The organization began a series of membership drives in Belle with plans to host membership drives at all seven of its operations during the coming weeks.
League can't really go green without axing jet fuel
When the world runs out of oil -- many believe it will be much sooner than later if you're a Peak Oil buff -- substitutes will abound in other areas, but flying will be pretty much a military endeavor unless things change pretty radically, pretty quickly.
France to review biofuel use on environment worries
PARIS (Reuters) - France is envisaging changing its policy on the use of biofuels after doubts were expressed on the environmental impact of so-called "green fuels," the Secretary of State for Environment said on Tuesday.
Saudi Data Show Rise In Dec Crude Oil Output, Lower Exports
NEW YORK -(Dow Jones)- Saudi Arabia, the world's largest crude oil exporter, boosted its output in December by nearly 2% from November, to 9.206 million barrels a day, but reduced its exports by 2.2%, or 161,000 barrels a day, official data show.The crude oil output figure is the highest reported by the kingdom since August 2006, figures submitted by the Saudis to the Joint Oil Data Initiative database.
The Peak Oil Crisis: The Future Of Our Cars – Part 2
Within the next ten years the size, shape, efficiency, fuel and numbers of private automobiles is going to undergo a radical change. The nine million gallons of gasoline we currently use in the U.S. each day simply will not be available in the quantities desired at any price. If a transition to a more abundant fuel source than gasoline and diesel does not take place on a widespread basis before the shortages begin, there will be troubles. It is virtually certain that at some point the government will have to impose rationing that will keep functions vital to our society such as food, water, utilities and public safety functioning. The rest of us are going to have to find alternative means of transportation.
OPEC favours holding output amid US pressure for hike
VIENNA (AFP) - OPEC ministers might debate whether pumping more oil would help revive the world economy when they meet here even though ministers favoured no change, the cartel's chief said on Thursday.
Gas prices seen spiking again in spring
NEW YORK - Get ready for another surge in gasoline prices.Experts are predicting pump prices, which jumped by almost a dollar a gallon in each of the last two springs in many parts of the United States, will spike again this year as refiners and gas stations switch from winter- to summer-blended fuels.
The increases, starting as early as February in southern California, could push the average national price to a record $3.50 a gallon or more by June.
Oil may hit $70 as weaker economy lowers demand
SAN FRANCISCO (MarketWatch) - An economic slowdown in the United States that could turn into an outright recession later this year is likely to weaken demand for oil in the months ahead, which could push the price of a barrel of crude as low as $70 by June, analysts said.But a host of factors ranging from the onset of driving season, uncertainty about the depth of the economic slowdown, and resistance to output increases from producing nations could all conspire to make any decline in prices short-lived and limit its impact on the consumer, they said.
Shell Profit Misses Estimates on Falling Production
Royal Dutch Shell Plc, Europe's biggest oil company, posted fourth-quarter earnings that missed analysts' estimates for the first time in two years because of a decline in production and lower refining margins.
Shell flags lower oil reserve additions in 2007
LONDON (Reuters) - Royal Dutch Shell added "at least 1 billion barrels" of new oil and gas resources in 2007, Chief Executive Jeroen van der Veer said on Thursday, around half the level the oil giant flagged last year.
British Renewable Target Very Hard to Hit - E.ON UK
LONDON - Britain will find it very hard to hit the renewable energy target set for it by the European Commission last week, the head of giant power utility E.ON UK said on Wednesday.
China's crops badly damaged by icy storms: AgMin
BEIJING (Reuters) - China's Agriculture Ministry said on Wednesday that the unusually harsh winter had dealt a serious blow to the country's wheat and vegetable crops and warned that damage could rise because of persistent cold....The crops affected included rapeseed, vegetables, wheat, tangerines and tea leaves, although the ministry did not specify how much of each had been damaged.
Is the UK ready for an oil shortage?
The cost of oil could pass the $300/barrel mark if there is a 15% shortfall in the supply of crude in the future - and most research suggests a much greater shortfall than that within 20 years. At a meeting this week of the All Party Parliamentary Group on Peak Oil, Toronto-based transport consultant Richard Gilbert revealed that while oil consumption is expected to increase by about a third by 2025 to more than 40 billion barrels a year, production will have fallen to less than 25 billion barrels a year.
2025 is as far into the future as 1991 is in the past. In that context, 17 years isn't a long time. So, when presented with a shortfall in the supply of crude oil by 2025, will we be ready? Transport and energy consultant Richard Gilbert's presentation to the All Party Parliamentary Group on Peak Oil this week was both frightening and stimulating - in that order. The context is horrific: oil production will peak in 2010 at more than 30 billion barrels a year and then drop rapidly as resources dwindle, resulting in production falling by one-third by 2025. However, oil consumption, if left unchecked, will grow by more than one-third by 2025 to more than 40 billion barrels a year. The worst-case scenario is a 39% shortfall in crude supply the best case scenario is a 26% shortfall.
Is the desire to relocalize merely aesthetic?
Last week, peak oil analyst Stuart Staniford wrote an essay on the Oildrum critiquing the relocalization movement which has arisen in response to the threat of peak oil. In a nutshell, Staniford argues that relocalizers—who Staniford rather derisively calls “reversalists”—are incorrect in their belief that imminent declines in oil availability will cause modern industrial agriculture to become untenable, requiring large numbers of people to relocalize and return to rural communities.
This is not an attempt to further or refute either post, I present no data and try to prove nothing, but Staniford and Astyk address two topics that I’m sure lots of folks spend considerable time thinking about: food and Peak Oil. Beyond that, the discussion takes a more personal nature with me; much of my own history involves looking back toward a simpler time in agriculture. Perhaps there are folks that can relate to that as well. Both sides of the discussion make valid, relevant points and after reading them I felt strangely torn, maybe like a child asked to choose between two parents.
Bush's much maligned climate talks may yet help global warming treaty
Bush's efforts has met with some skepticism, especially after the first meeting last September which one senior environmental hand described as "Climate 101 when the rest of the world was in graduate school." One test of how serious the White House is about the process will come in discussions of future actions, some analysts say. Until now, the administration has emphasized actions it has already taken – setting an interim greenhouse gas "intensity" target for the US economy, or the amount of emissions permitted per unit of GDP, pumping money into climate change research, and the recent adoption of mandatory fuel economy standards.
UN: climate change may cost $20 trillion
UNITED NATIONS - Global warming could cost the world up to $20 trillion over two decades for cleaner energy sources and do the most harm to people who can least afford to adapt, U.N. Secretary-General Ban Ki-moon warns in a new report.
Warmer Atlantic worsens hurricanes
WASHINGTON - When the water in the hurricane breeding grounds of the Atlantic warms one degree in the dead of summer, overall hurricane activity jumps by half, according to a new study.
ELM (Export Land Model) is NOT just a theory, it is happening now - not good news for people who have to import a lot of oil.
The stunning number was in the story:
Note that they appear to be talking about crude oil (up 15.3%), not total liquids, but I suspect that total liquids consumption was probably up from +10%/year to +15%/year. If memory serves, I got some grief last year when I used a +10%/year estimate for Saudi Total Liquids consumption. I did have an advantage. I was basing the estimate on a communication from a well placed "Non-Saudi source in Saudi Arabia."
In any case, it's a virtually certainty that Saudi Arabia is going to show an accelerating net export decline from 2006 to 2007. We shall see what happens in 2008.
Things are not starting out well for "Import Land."
Russian crude oil exports are reportedly at a two year low, while Russia is on track to become, within two years, the #1 car market in Europe.
Also, note the number of countries adding and/or increasing duties on exported crude and products.
http://ieeexplore.ieee.org/iel5/11204/36065/01708907.pdf
My September, 2007 estimate for 2007 Saudi net exports (I assumed a fourth quarter increase in production):
The Saudi's are in a bind. If they consume too much their export revenues will fall, causing economic crisis at home. They will have to curb domestic consumption.
"They will have to curb domestic consumption."
UK rate of increase in consumption: +0.2%/year; most recent peak to zero net exports in 7 years
ELM rate of increase in consumption: +2.5%/year; most recent peak to zero net exports in 9 years
Indonesian rate of increase in consumption: +4.1%/year; most recent peak to zero net exports in 8 years
Note that Saudi Arabia is currently showing, at least in dollar terms, increasing cash flow from declining net export volumes.
The Saudis are not in a bind. The Saudis and the rest of the Gulf States are making more money than ever. They have an enormous current account surplus (http://www.rgemonitor.com/blog/setser/233979/). Where do you think they're getting the money to buy all those chunks of failing U.S. banks?
Demand is so inelastic that it actually makes sense for them economically to consume more of their production at home.
You beat me to it!
They will have plenty of crude oil long after there is, for all practical purposes, none left for 'net importer' countries to import.
So, as long as nobody steals their oil or blows up their oil wells or comes up with a viable alternative to oil they will be one of the last countries to be in a bind!.
They don't need to export any more oil than required to balance their trade.
Why are they exporting more than they need to now, as it is taking an unnecessary financial risk?
They need to make their oil last as long as possible, since without it they are probably literally dead - KSA is a very hot desert!
IMO, in the future if you want their oil you will have to trade something they need, like food.
Pieces of paper from heavily indebted nations that say something like 'I promise to pay the bearer in 30 years' probably won't do! - would you take that risk?
Right, also think of the profits for Saudi Arabia if their decline rate is slower than the decline rate for the rest of the world.
All that money must make your head swim Moe, but you can't eat, drink, nor actually swim in it.
Saudi is not is an enviable position IMHO.
Money ain't $hit but $hit might be money some day;-}
Hi Moe,
re: decline rate slower
Do you have any reason to think this might be the case?
The Saudis may not be in a bind right now but they sure will be if the global economy ever collapses. Saudi has 22 million citizens, not counting 5.6 million expats, and their population is growing at one of the fastest rates of any nation on earth. Saudi imports virtually everything except oil, dates and camels. All their industry, such as it is, is manned almost entirely by expats. And that industry is dependent entirely upon imported raw material.
Saudi does not produce enough food to feed more than three million people. They will be in a huge bind if anything happens to food imports. And eventually, something will happen to food exports from the rest of the world, which means......
Ron Patterson
Ron says that “Saudi imports virtually everything except oil, dates and camels”. Well, according to Wikipedia the Saudis actually import camels from Australia:
“Australia boasts the largest population of feral camels and the only wild herd of dromedary (one-humped) camels in the world. Live camels are exported to Saudi Arabia, the United Arab Emirates, Brunei, and Malaysia where disease-free wild camels are prized as a delicacy. Australia's camels are also exported as breeding stock for Arab camel racing stables.”
Tasman, thanks for that bit of information. I was totally unaware of that fact. Shipping camels to Saudi Arabia! Imagine that. A little like carrying coals to Newcastle wouldn't you say?
Thanks again, Ron
Saudi Arabia will soon be importing coal as well from Australia.
Best Hopes ?
Alan
I wonder about that. Can Australia really increase coal exports?
http://www.smh.com.au/news/business/coal-sales-deferred-as-newcastle-shi...
http://www.sxcoal.com/en/doc/show.asp?typeid=1000&f_id=18512
I'm still curious about where you can drive in Saudi Arabia. And only half (at most) of the population drives! Whatever are they doing with all that gasoline?
Who said it was gasoline?
Saudi Arabia has gotten smart. Instead of selling us oil and making 30-50% barrel, they are refining the oil, or making plastics or making fertilizer or whatever and making a A LOT more money.
If I read the original story correctly, it said gasoline consumption was up 65%
Does that mean they are selling finished product? And if so, how does that figure into the "export land model?" I'm a little confused now. Does "Export Land" refer only to crude oil and NGL? Or all petroleum products -- including fertilizer and plastics -- that are produced in a country?
The 65% number referred to the month to month increase in refinery utilization. For 2007, gasoline consumption, according to the story, was up 9.7%.
As many of us have speculated, Saudi Arabia may have boosted crude oil exports (and caused fourth quarter production estimates to go up) while also boosting liquids imports, because of refinery maintenance.
Net Exports measures total liquids production & consumption, resulting in net exports/imports.
Fertilizer is made using natural gas, and plastics from ethane etc. Their refinery output has gone to local consumption, although this will change:
I have a friend who lived in Saudi Arabia in the 80s, and he drove all over the country -- at 100+ mph.
I saw a youtube video of luxury cars and suvs in Dubai, UAE - if you think the US has gas guzzlers, you should see those. 8+ cylinders for virtually everything.
Dubai street racing videos on YouTube are a comedy goldmine!
It's pretty apparent that almost all the drivers in those videos have invested large chunks of oil wealth in high performance machines and very little in high performance driving lessons.
Watch the Burnout International. Watch the 3rd one in Iraq.
Got to watch, very entertaining. Only a minute long or so.
http://vids.myspace.com/index.cfm?fuseaction=vids.individual&videoid=268...
Another big factor is demographics. The average Saudi family has something like six to seven kids. And remember the positive feedback loop. At least in dollar terms, Saudi Arabia will almost certainly show increasing cash flow from declining net oil exports.
I try to avoid offering investment advice, but I do ask questions. If one accepts the ELM premise, doesn't that mean that world stock markets are overvalued and oil is undervalued?
Regarding the depression aspect and its presumed impact on consumption, check out world oil consumption from 1930 to 1940. Granted, the US was still in the early stages of the auto age in the Thirties, but the key difference between the Thirties and now is that in the Thirties millions of people wanted to drive cars for the first time, while today billions of people want to drive cars for the first time.
Traffic in Saudi Arabia is absolutely atrocious. The streets in the towns are jammed bumper to bumper and the traffic between cities is jammed also. They have 5 million expats and most of them drive, plus every Saudi family that can afford a car has one.
Saudi is a big country and the cities are, for the most part, very far apart. This means lots of time on the road when you are going from city to city.
There are no trains in Saudi so everything moves by truck. Huge Mercedes diesels, the favorite truck in Saudi, jam the roads in Saudi. And they drive like hell. Saudi must import almost everything except oil , dates and camel meat. Everything else must be imported. Virtually all the cargo import terminals are on the West Coast so everything must be trucked east to reach the interior and the East Coast ARAMCO infrastructure. There are a few cargo terminals on the Persian Gulf coast but they are nothing compared to those on the Red Sea.
Saudi probably has more road miles driven per capita than any nation in the Middle East.
Ron Patterson
Everybody drives in the KSA, the women are chauffered.
The capital Riyadh is a huge grid of roads just like the USA, with fast food places and shopping malls just like in the USA.
Even in Riyadh (situated where it is because it's cooler at altitude) it is extreemly hot in the summer, almost nobody walks far, just like in the USA - only the slaves work out in the sun.
http://en.wikipedia.org/wiki/Riyadh
The slaves cars are so old they mostly don't have aircon in my experience.
The gasoline is cheaper than water - they even lowered the price of gasoline when I was last there - that's not like the USA!
LOL Xeriod! It's true! In the US only "losers" walk or bike or bus. They have to work out in the sum, and yes, slaves' cars in the US often have no aircon. Except for very select places in the US, no one walks if they can possibly avoid it. In any small town or city, anywhere really, someone riding a bike is presumed to have lost their drivers' license or be too poor to have a car. And a great many are too poor to have a car, too.
Someone pointed out to me years ago that it's no accident that the rich area of Newport Beach is cheek-by-jowl with the poor ghetto of Costa Mesa, he said that Wherever you have rich, nearby there will be the very poor. His statement kind of pissed me off at the time, but it made me observe what I'm not supposed to see, and he's turned out to be right, everywhere I've lived.
Well, you've got to have SOMEONE to make your food and take out the trash, right?
I'd rather see the rich starve for lack of a maid and die in a pile of their own un-taken-out trash thank you.
"In the US only 'losers' walk or bike or bus"
I live in small city and usually walk to work (about 3/4 mile each way). People think I'm nuts. They pull over in their cars to the side of the road when they see me walking, ask me if my car is in the shop and do I need a ride. They just can't understand that I prefer to walk. Clears my head in the morning before work and helps me unwind after a busy day.
They might eventually get the message. I've walked to church for seven years and about three years in to the process people stopped stopping me and asking if I wanted a ride.