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> For Saudi Arabia the deal with America is that the House of Saud get to stay in power in exchange for the oil, it is that simple. If there is this 'uprising'
by adventured 8y ago
> For Saudi Arabia the deal with America is that the House of Saud get to stay in power in exchange for the oil, it is that simple. If there is this 'uprising' that you speak of then it will be Uncle Sam's job to put it down.
That certainly used to be the deal. The US no longer has any need of OPEC oil. The US got 3.3 million barrels per day from OPEC in 2017, down from 4.2m in 2012. I haven't seen the last two months of data for 2018, but I believe that fell below 3m per day for 2018. That will drop by another million barrels per day over the next few years.
US oil production is estimated to climb to 16-18 million barrels per day over the next eight to ten years give or take. OPEC now stands in the way of the US maximizing its oil position and the value of its enormous production.
The US will benefit from destroying Saudi Arabia at some point. US global hegemony (courtesy of energy production) is increased if you permanently decimate Saudi Arabian oil production. All the countries that need Saudi Arabia's oil, including China, will find themselves into an economically compromised position and require US oil to fill the demand.
Between now and the switch to all-electric vehicles globally (20-30 years), the US is economically best served to deplete as much of its oil as possible.
If you're a nefarious US looking to increase your power, the only question would be the ideal time to pull the trigger and collapse them. You boost US production from 12m barrels per day, to 18m, and slash Saudi down by six plus million by turning their country into a war zone.
18m barrels per day times $85 oil = $1.53 trillion
Versus today's 12m barrels per day at $50 oil = $600 billion
Over ten years, that value gap is reasonably $8 to $10 trillion. How much are Exxon and Chevron (2 of the 3 largest holders of acreage in the Permian) worth under that 18m * $85 scenario?
Or push it a notch further: 2029, 20m barrels per day at $100 oil (equivalent to maybe ~$60 in 2004, a tolerable inflation adjusted level). $2 trillion per year, the size of Italy's whole economy. It would pour a bonanza of epic proportions into the domestic US economy. I don't believe either 18m or 20m barrels per day of US production can co-exist in the next eight to ten years with Saudi Arabia's ~10-11m production (much less their desire/fantasy for more production at a higher price to keep up with their budget).
Simple question: what will the US do to realize that value potential? It'll certainly not be concerned about the collapse of Saudi Arabia, putting it mildly. Cynically or not, there's a popular opinion about what the US is willing to do as it pertains to oil; what then will it do for its own, massive, direct benefit re oil? That benefit scenario is several fold better than just ensuring oil supply from overseas as in the past. The days of (non-Canadian) foreign oil being a strategic critical are nearly over, which means the US allegiance to the Saudi deal is running out. Everyone knows how willing the US is to flip such an allegiance when it's convenient, there's no scenario where the US will feel bound to continue with that after it no longer serves the US interests.
- simonh 8y agoThat doesn't really make much sense. As the biggest global consumers of oil, US businesses and the economy in general benefit more from cheap oil than from expensive oil. Furthermore a Saudi in chaos can't act as a regional counter to Iran and pro-Iranian forces in Syria, Iraq and Yemen. A civil war in the kingdom would undo decades of American power broking and defense alliance building in the region and leave it wide open to exploitation by America's rivals. Bear in mind SA and the gulf states have huge Shia populations.
- adventured 8y agoDoes anybody here think the US doesn't operate by special interest lobbying? At 16m-20m barrels per day, the interests served by that much oil production at $85-$100 prices, is pretty clear. The US economy can easily tolerate $85-$100 oil circa 2029. Inflation adjust that back 25 years to 2004, you get maybe in the realm of $50-$60 oil. The US will be less oil dependent in 2029 than it is today or in 2004, continuing its existing trend line of a lot more economic output without a corresponding increase in oil consumption. $10-$15 billion in annual arms purchases from Saudi Arabia is meaningless against $1.5-$2 trillion in annual domestic oil production in my scenario. They'll just bump the US military budget to offset the difference. Your last section, describing how the US needs Saudi as a regional counter and stabilizing agent, assumes the US acts with particular long-term rational behavior in its pursuits. When have you ever seen that be the case in the post WW2 era? It's rare. We wouldn't be in the situation we are now with Iraq, Syria, Iran, et al. if the US behaved the way your theory proposes. The scenario one would expect based on the last 70 years of US behavior, is instigated chaos (whether originally intentional or not). Exxon and Chevron (not to mention a dozen other relevant oil companies) are far richer and more politically powerful than Lockheed Martin.
- simonh 8y agoSo when it suits your pre-conceived ideas the US acts predictably in support of establishment interests, but when it doesn't the US acts irrationally against it's own interests. If it's irrational, how can you predict anything about it's behaviour?