Something Just Snapped In Saudi Money Markets

I found an excellent article from Bloomberg that might be beneficially worth reading and I am providing a link. :


http://www.bloomberg.com/news/articles/2015-12-28/saudis-plan-unprecedented-subsidy-cuts-to-counter-oil-plunge-iiqbmg4x

I hope you find this interesting/useful/ worth your time reading.


Sincerely,

John Scior

Mr. Turi,


I made my 20-30 year estimation just from figures I had I previously read about. I have read world oil proved reserves of top 17 countries is at 1324 Billion barrels and current world oil consumption is at 94 million barrels per day ( 34 billion per year ), so based o those numbers it looks like 38 years supply of proven world oil reserves at present. Of course many variables affect those numbers such as how much of the actual proven reserves are economically recoverable ( I've read that only a percentage of those reserves is economically recoverable ) then one should factor in the supply side things like technological advances like fracking for oil extends the supply but things like emerging countries oil demand increasing ( such as China's move from an emerging economy to one of a more modern society with grater use of energy ) causes the rate of demand or world drawdown of reserves to increase. Some numbers or proven world oil reserves are in doubt so its almost impossible to get a 100 % accurate prediction when oil as a transportation fuel is beyond economic feasibility.
Alternatives or substitutes make sense when oil is so highly priced. within the pat 10 years, these alternatives have seen great advances. We see today due to lower oil prices, that these alternatives are less realistic competitors to gasoline powered vehicles and are thus declining. This may be an important factor that is ignored by the media as they want to give a simple answer to a complex question. Why are the Saudi's increasing production ?? "Oh, they want to drive frackers out of business."
Whatever the time frame, there will come a day when relatively cheap oil is no more and another alternative must be developed. When a country such as Saudi Arabia has a wealth of oil in its "bank " ( ie below ground as proven oil reserves ) they want to extend the viability of that resource by preventing say cellulosic ethanol from becoming a non-subsidized competitor or say electric vehicles from replacing gasoline powered automobiles.
Getting back to the point of this article, the Saudi's realize that at some point, ( be it 20, 30 or even 60 year away ) an alternative to oil will happen. They have been cutting subsidies and attempting to move toward a more market based economy before their oil revenues are far surpassed by non-economically viable subsidized businesses. By cutting the strings so to speak, these businesses become more risky and thus may be an explanation for the increase i n interest rates in the Saudi Money markets.

Mr. Scior,

I wholeheartedly doubt that fossil fuels will be replaced in 20-30 years, if that is what you mean by the "age of fossil fuels is nearing its end." Natural gas as a fuel is only becoming more and more popular due to its unchallengeably cheap economics. And, when Tesla aims to sell half a million cars per year over the next decade (which is a drop in the bucket), that says that gas is here to stay- for much longer than 30 years.The sad truth is that without government subsidies, these alternative fuels would never be competitive and will only drain tax dollars at an ever-increasing rate.

However, I like that you doubt the mainstream media focus of the low oil price as purely a means to salvage Saudi market share. In my view, which is entirely speculation, a low oil price serves the medium/long term geopolitical goals of those conducting United States' foreign policy. The Saudis were encouraged to do so during the 1980s which eventually crippled the Soviet Union (among other things), and history certainly repeats itself.

Best,
Bernie Turi