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213 comments on DrumBeat: January 31, 2008

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weatherman on January 31, 2008 - 10:42am Permalink | Subthread | Parent | Comments top

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.

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westexas on January 31, 2008 - 10:58am Permalink | Subthread | Parent | Comments top

"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.

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Moe_Gamble on January 31, 2008 - 11:13am Permalink | Subthread | Parent | Comments top

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.

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xeroid on January 31, 2008 - 12:25pm Permalink | Subthread | Parent | Comments top

The Saudis are not in a bind.

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?

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Moe_Gamble on January 31, 2008 - 1:07pm Permalink | Subthread | Parent | Comments top

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.

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souperman2 on January 31, 2008 - 2:22pm Permalink | Subthread | Parent | Comments top

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;-}

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Aniya on February 1, 2008 - 10:25pm Permalink | Subthread | Parent | Comments top

Hi Moe,

re: decline rate slower
Do you have any reason to think this might be the case?

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Darwinian on January 31, 2008 - 1:26pm Permalink | Subthread | Parent | Comments top

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

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Tasman on January 31, 2008 - 6:23pm Permalink | Subthread | Parent | Comments top

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.”

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Darwinian on January 31, 2008 - 7:03pm Permalink | Subthread | Parent | Comments top

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

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AlanfromBigEasy on January 31, 2008 - 7:41pm Permalink | Subthread | Parent | Comments top

Saudi Arabia will soon be importing coal as well from Australia.

Best Hopes ?

Alan

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Rethin on January 31, 2008 - 9:44pm Permalink | Subthread | Parent | Comments top

I wonder about that. Can Australia really increase coal exports?

http://www.smh.com.au/news/business/coal-sales-deferred-as-newcastle-shi...

THE queue of coal vessels at the Newcastle Port has grown so large that some customers are deferring purchases rather than let their ships idle offshore for 20 days before loading.

http://www.sxcoal.com/en/doc/show.asp?typeid=1000&f_id=18512

Australian coal producers are expected to miss out on billions of dollars in revenue in the next 10 years due to inadequate rail and port infrastructure, which is holding back exports.

Ships are queuing for weeks to load coal at ports in Queensland and New South Wales due to limited capacity and restrictions on the amount of coal that producers are allowed to transport to port by rail.

Port and rail operators have earmarked hundreds of millions of dollars for new infrastructure to cope with the unprecedented demand being driven by the massive industrialisation and urbanisation of China.

But it will take years before ports and rail networks can handle enough coal to satisfy global demand

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213 comments on DrumBeat: January 31, 2008

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