Custom Search

Sunday, December 07, 2008

Saudi Arabia and Oil’s Future

Saudi Arabia does not fear the current drop in oil prices, matter of fact it tells them that the business needs to be reevaluated with intense scrutiny. 60 Minutes with Lesley Stahl did a great piece on what the Kingdom of Saudi Arabia is doing to hedge their bets for the future of oil. According to the report, Saudi Arabia would like the price per barrel to be at $55 in order to support all of its production costs and government obligations.

They are bringing online two oil fields that will be able to supply close to three million barrels a day alone in 2009 with new technology that can find every last drop of oil in a field that would supply oil for the next fifty years. According to the piece, that is more oil per day than most Middle East countries can supply per day today. Lesley was able to get the gentleman in charge of the oil fields to admit that the cost to produce one barrel of oil all across the kingdom is less than $2 per barrel and yet the two fields they are opening up in 2009 they paid cash for at the richly sum of $60 Billion dollars.

Trust me, I am having no pity for the Saudi Oil Kingdom that sat back at the pool while the cost of a barrel of oil hit $147 per barrel. $147 dollars per barrel minus $2 production cost, then subtract say another $10 bucks per barrel for overhead and paying the kingdom heirs off for sucking the go go juice out leaves $135 per barrel pure profit! Multiply that profit by the number of barrels of oil they supply a day to the world and you have a disgusting amount of expendable cash. Or dare I say a savings account to pay for any new technology that serves their purpose and nations future.

I don’t begrudge them the mega gross profit they have received; I frankly admire them for repeating the P.T. Barnum business plan. If there was an American business that could earn that type of profit margin on any product and legally, I say legally for a reason, then all the power to them. What really scares me is the fact that Saudi Arabia is not being stupid with its profits and just spending away like drunken sailors on their first shore leave in six months. No offense to sailors, it was just an expression. Saudi Arabia is looking at wind power and solar power for its future offset when oil declines in use across the world. Saudi Arabia is looking at engineering the greenest fossil fuel engine the world has ever seen. Saudi Arabia is doing now what America should have done immediately after the oil embargo of the 1970’s and I have to applaud them for seeing the future need where most American industries do not.

Oil and gas prices are going to tank for the next few years and that cheap oil will pave the way for the decline in American and world research on expanding solar power technology, wind power technology, and every other alternative source to oil but the Saudi government is still going to toss hundreds of billions of dollars at these technologies every single year. From the spoils of this past energy crisis will go the investment and ability to continue the research that in a couple of decades will pay off enormously for the kingdom. Saudi Arabia in thirty years will be the largest exporter of green energy in the world simply because they invested in the technology today. That is the business plan that they are following and it is a damn good one! Maybe we in America should look at their plan and try to beat them to the moon so to speak.

When the cost of a gallon of gas is just $1.00 then where is the market for an alternative fuel that cost $3 for the same vehicle? When oil fed electric plants can produce a megawatt of power at two thirds the cost of a wind turbine then where is the market for wind power? Same goes for solar power and the list goes on for all the alternative energy initiatives when it comes right down to the cost of energy for the average consumer. It is a little disheartening but it is reality. Or am I wrong?


Labels: , , , , , , , , , , , ,

AddThis Social Bookmark Button


Post a Comment

Subscribe to Post Comments [Atom]

<< Home