3 ms·

If it were possible to get in short on this (it's usually not, right after an IPO), that would be the best investment decision anyone's ever made. $2 trillion i

If it were possible to get in short on this (it's usually not, right after an IPO), that would be the best investment decision anyone's ever made. $2 trillion is ridiculous. Remember when PetroChina hit $1 trillion market cap in 2007, and it was supposed to be a huge milestone for publicly-traded state oil firms? Now they're at a little over a tenth of that. Every reason to expect that the same thing will happen here.

jonknee 10y ago
PetroChina's valuation in 2007 has very little to do with Aramco pricing its future IPO. That said, you can just go short oil in general, if oil demand is lagging Aramco will be worth a lot less than $2t.
adventured 10y ago
> that would be the best investment decision anyone's ever made Oh now, the best investment decision anyone has ever made, was Masayoshi Son buying a third of Alibaba for $30 million or so. I don't think shorting Aramco is going to get you a ~2,500 fold return in 14 years.
andrewjl 10y ago
It's not so cut and dry. One reason Aramco is worth so much is that the cost to extract their remaining reserves (on a per barrel basis) are one third of costs in the U.S. A collapse of oil prices may decimate the energy industry in the developed world (which extracts from offshore or unconventional sources) and would mean Aramco becomes the only supplier. Now obviously they wouldn't be able to raise prices beyond a certain level, but they have many decades of guaranteed cash flow remaining.
- rrggrr 10y ago
  Even if their costs to remove are 1/3 lower its high sulfur and far from consumers, and its priced in dollars. Refining and logistics costs are high.
paulsutter 10y ago
Saudi Aramco's annual revenue is over $300B, and their reserves are more than 260 billion barrels. Oil prices have ranged from $15-ish to $140-ish since 1990. So $2 trillion doesn't seem outlandish at all for Aramco. Early angel investors in Uber have made about 10,000x, plus or minus, so even if you're right there's no potential for shorting Aramco to be the best investment ever (Uber's seed round was at 4 millionish, and the current valuation is 60 billionish).
- acchow 10y ago
  > Oil prices have ranged from $15-ish to $140-ish since 1990. What is the relevance of past oil prices in the future? Especially in light of photovoltaics?
  - paulsutter 10y ago
    If you have a conviction about oil prices that's a really easy bet to make.
mathattack 10y ago
The danger is that you're at risk to a surge in oil prices. While the company may not be well run, if oil prices rise, you could get killed in the short. The ideal trade would have some kind of oil price hedge too.
- deleted 10y ago
  [deleted]
charlesdm 10y ago
I'm not so sure. Their reserves are massive + cheap to extract. Oil isn't going to go away anytime soon, even if we wanted it to. And even if the value of crude dropped another 25-50%, it's still quite valuable. The problem is that it's located in Saudi Arabia. I doubt they have decent corporate governance + non-interference from the state.

jonknee 10y ago

PetroChina's valuation in 2007 has very little to do with Aramco pricing its future IPO. That said, you can just go short oil in general, if oil demand is lagging Aramco will be worth a lot less than $2t.

adventured 10y ago

> that would be the best investment decision anyone's ever made Oh now, the best investment decision anyone has ever made, was Masayoshi Son buying a third of Alibaba for $30 million or so. I don't think shorting Aramco is going to get you a ~2,500 fold return in 14 years.

andrewjl 10y ago

It's not so cut and dry. One reason Aramco is worth so much is that the cost to extract their remaining reserves (on a per barrel basis) are one third of costs in the U.S. A collapse of oil prices may decimate the energy industry in the developed world (which extracts from offshore or unconventional sources) and would mean Aramco becomes the only supplier. Now obviously they wouldn't be able to raise prices beyond a certain level, but they have many decades of guaranteed cash flow remaining.

rrggrr 10y ago
Even if their costs to remove are 1/3 lower its high sulfur and far from consumers, and its priced in dollars. Refining and logistics costs are high.

paulsutter 10y ago

Saudi Aramco's annual revenue is over $300B, and their reserves are more than 260 billion barrels. Oil prices have ranged from $15-ish to $140-ish since 1990. So $2 trillion doesn't seem outlandish at all for Aramco. Early angel investors in Uber have made about 10,000x, plus or minus, so even if you're right there's no potential for shorting Aramco to be the best investment ever (Uber's seed round was at 4 millionish, and the current valuation is 60 billionish).

acchow 10y ago
> Oil prices have ranged from $15-ish to $140-ish since 1990. What is the relevance of past oil prices in the future? Especially in light of photovoltaics?
- paulsutter 10y ago
  If you have a conviction about oil prices that's a really easy bet to make.

mathattack 10y ago

The danger is that you're at risk to a surge in oil prices. While the company may not be well run, if oil prices rise, you could get killed in the short. The ideal trade would have some kind of oil price hedge too.

deleted 10y ago
[deleted]

charlesdm 10y ago

I'm not so sure. Their reserves are massive + cheap to extract. Oil isn't going to go away anytime soon, even if we wanted it to. And even if the value of crude dropped another 25-50%, it's still quite valuable. The problem is that it's located in Saudi Arabia. I doubt they have decent corporate governance + non-interference from the state.