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So, if we take a look at Venezuela's situation, in which a system that worked well enough when oil was >$100/barrel becomes disastrous after the price drops, an

So, if we take a look at Venezuela's situation, in which a system that worked well enough when oil was >$100/barrel becomes disastrous after the price drops, and we apply that scenario to Saudi Arabia, it looks pretty frightening. SA is far more central to world society (e.g. its role in the world religion of Islam, its role in OPEC) than Venezuela. Perhaps the world should have done more to help Venezuela, but we at least had the option of ignoring it (or worse). When (not if) SA goes the way of Venezuela, it will be a far messier situation for the rest of us, and I don't think we are even thinking about it, much less preparing.

jeffreyrogers 8y ago
My understanding is that Venezula's problems are exacerbated by its political situation. So I don't know that I'd predict Saudi Arabia becoming like Venezula. Saudi Arabia also has the lowest cost of production of any country, if I recall correctly, and they've weathered low prices just fine in the past.
Cyph0n 8y ago
Many Muslims, particularly those outside the Gulf, are looking towards KSA less for religious guidance. Islamic scholars that are allowed to operate by KSA have been shown time and again to be hypocritical and have little to no dignity. Their judgements and positions change with the whims of the king and crown prince, which lends little to their credibility. The remaining scholars that decide to stick to their principles end up in prison. For me personally, the only unique thing that KSA has that you can’t find elsewhere is Mecca.
- breitling 8y ago
  This is true. The general public the world over is realizing that the Saudi scholars are "regulated" by the Saudi government...ergo the foreign powers that keep the ruling family propped up. They have zero credibility. Mecca and Medina are an exception to this.
- rossdavidh 8y ago
  Thanks for your perspective, it is much better informed than mine. Mecca/the Hajj was definitely the aspect I was thinking of.
- logosmonkey 8y ago
  A bit off topic but out of curiosity how does this playout? Was there a period of time (in recent history) where Saudi scholars were seen as preeminent in Muslim thought and now they aren't? What kind of impact does that scholarship have? Is it something that would have been read by Imam's and then subsequently disseminated to adherents or is it part of most Muslims religious practice to stay engaged with the scholarship?
cco 8y ago
What would you call the US's massive increase in oil production if not preparing for possible problems in Saudi Arabia?
- rossdavidh 8y ago
  It is certainly relevant to the economic situation, but I'm not sure it was done out of an awareness of potential instability in SA. I think it was done more purely for shorter-term economic motives. Which doesn't make it wrong, but I don't think it's evidence of a perspective on a larger situation. For example, if KSA blows up politically, and it leads to (for example) 6 months of no oil coming out, do we even have the tanker or pipeline capacity to keep Europe supplied?
- danielvf 8y ago
  The US's massive increase in production in 2018 seems to be a pretty natural outcome of the free market. Oil prices go up. Mind-bogglingly huge investments go into getting previously impossible-to-get oil out of the ground. These techniques get cheaper through scale, experience, and innovation. Now it's possible to profitably use them at medium prices. (However, in 2014 the US ended a 40 year ban on exporting crude oil. We also would not have seen this boom without a return to more free market on oil.)
danielvf 8y ago
Venezuela's oil situation is a Venezuelan government inflicted wound. The production declines due to governmental mismanagement are bigger than the oil price changes. Crude oil production is down to 50% of what it was when Chavez took power. The refining side is even worse, with gasoline production was down to 17% of rated capacity mid-2018, and much worse since then. The latest report I could find had their biggest refinery operating at 5% of rated capacity, and often completely out of action. It's not uncommon from late 2018 to now for Venezuela to be unable to export oil for periods because of pipelines and processing plants breaking down from atrocious maintenance. For just a few of the issues, see: https://en.wikipedia.org/wiki/PDVSA https://en.wikipedia.org/wiki/PDVSA
randomdood 8y ago
Russia just visited and purchased most if not all of Venezuela’s oil production futures for pennies. It not gonna turn out good.

jeffreyrogers 8y ago

My understanding is that Venezula's problems are exacerbated by its political situation. So I don't know that I'd predict Saudi Arabia becoming like Venezula. Saudi Arabia also has the lowest cost of production of any country, if I recall correctly, and they've weathered low prices just fine in the past.

Cyph0n 8y ago

Many Muslims, particularly those outside the Gulf, are looking towards KSA less for religious guidance. Islamic scholars that are allowed to operate by KSA have been shown time and again to be hypocritical and have little to no dignity. Their judgements and positions change with the whims of the king and crown prince, which lends little to their credibility. The remaining scholars that decide to stick to their principles end up in prison. For me personally, the only unique thing that KSA has that you can’t find elsewhere is Mecca.

breitling 8y ago
This is true. The general public the world over is realizing that the Saudi scholars are "regulated" by the Saudi government...ergo the foreign powers that keep the ruling family propped up. They have zero credibility. Mecca and Medina are an exception to this.
rossdavidh 8y ago
Thanks for your perspective, it is much better informed than mine. Mecca/the Hajj was definitely the aspect I was thinking of.
logosmonkey 8y ago
A bit off topic but out of curiosity how does this playout? Was there a period of time (in recent history) where Saudi scholars were seen as preeminent in Muslim thought and now they aren't? What kind of impact does that scholarship have? Is it something that would have been read by Imam's and then subsequently disseminated to adherents or is it part of most Muslims religious practice to stay engaged with the scholarship?

cco 8y ago

What would you call the US's massive increase in oil production if not preparing for possible problems in Saudi Arabia?

rossdavidh 8y ago
It is certainly relevant to the economic situation, but I'm not sure it was done out of an awareness of potential instability in SA. I think it was done more purely for shorter-term economic motives. Which doesn't make it wrong, but I don't think it's evidence of a perspective on a larger situation. For example, if KSA blows up politically, and it leads to (for example) 6 months of no oil coming out, do we even have the tanker or pipeline capacity to keep Europe supplied?
danielvf 8y ago
The US's massive increase in production in 2018 seems to be a pretty natural outcome of the free market. Oil prices go up. Mind-bogglingly huge investments go into getting previously impossible-to-get oil out of the ground. These techniques get cheaper through scale, experience, and innovation. Now it's possible to profitably use them at medium prices. (However, in 2014 the US ended a 40 year ban on exporting crude oil. We also would not have seen this boom without a return to more free market on oil.)

danielvf 8y ago

Venezuela's oil situation is a Venezuelan government inflicted wound. The production declines due to governmental mismanagement are bigger than the oil price changes. Crude oil production is down to 50% of what it was when Chavez took power. The refining side is even worse, with gasoline production was down to 17% of rated capacity mid-2018, and much worse since then. The latest report I could find had their biggest refinery operating at 5% of rated capacity, and often completely out of action. It's not uncommon from late 2018 to now for Venezuela to be unable to export oil for periods because of pipelines and processing plants breaking down from atrocious maintenance. For just a few of the issues, see: https://en.wikipedia.org/wiki/PDVSA https://en.wikipedia.org/wiki/PDVSA

randomdood 8y ago

Russia just visited and purchased most if not all of Venezuela’s oil production futures for pennies. It not gonna turn out good.