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The Great Saudi Oil Deception

Over the last couple of years we have all grown used to stories of financial problems caused by lies, secrecy and general deception. Just using words like Enron, Madoff and derivative ought to be enough to jog the fading memory.

But it seems that the world has another such problem to contend with at some point…

Enter stage right, Saudi Arabia and Wikileaks.

According to this story, the oil reserves in Saudi Arabia may be overestimated. I must confess, this is not a shock to me. The independent financial newsletter crowd has been writing about similar stories for quite some time. They often write about how reserves were magically increased around 20 years ago to fit OPECs output models.

However, they are independents and sometimes are super-reliable, sometimes less so. Internal cables from the American government seem as though they may be based on a little more than that.

Apparently, Saudi reserves are “overstated by as much as 300 billion barrels of ‘speculative resources’.” And that, “soon after 2020 “a slow but steady output decline will ensue and no amount of effort will be able to stop it.”

I don’t pretend to be an oil expert. I’m not. But even my limited capacity can tell that 300 billion barrels of oil is quite a lot. Or, possibly, more than quite a lot.

For Saudi reserves to increase dramatically and then a few decades later decrease just as dramatically, I can think of two possible scenarios. Either a) someone lied and the oil never was there, or b) a magician with immense powers has done something amazing with a lot of barrels of oil.

I’m guessing a.

Keen memoried readers may recall that Royal Dutch Shell had their own reserves scandal back in 2004. That related to a measly 4 billion barrels.

Does this mean that it is not only bankers that we cannot trust to safeguard the global economy? It could be hard to tell which set of lies proves to be the most costly…

How can this not be bullish for the price of oil? Economics is based on scarcity and oil just officially became a whole lot scarcer. The negative consequences for the global economy must be clear, I don’t need to spell them out.

It also suggests that the shift into a ‘green economy’ needs to be happening much faster. Even if we presume that we need to generate our power in a low carbon way very soon to help prevent further climate change issues, this simply adds to the pressure for that need.

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  1. This is not new.

    The KSA (Kingdom of Saudi Arabia) like its cohorts in the UAE and in SE Asia (excepting Turkey) have been filling out the deception of their reserves for some time.

    Now Sir, the time has come to take a World Stock of all the Oil reserves and the potential of the new Super-Economies of the PRC (Peoples Republic of China) India and Portugal to consume and consume and consume oil as though there was no tomorrow. Forget for the moment that the issue in the minds of the UN or the EU or the other Groups of Countries is on Climate Change for once and just imagine what we read here in previous EurActiv/BlogActiv correspondents is a reality.

    We have to assume the following was a reality and would occur. If China and India alone were to target the use of 1 car per 5 of their populations by 2050 (as recently reported by President of China) these two countries would have 750 million extra cars by that time. If we were to add the countries Indonesia Pakistan the Philippines and some of the African Nations and also include the natural growth patterns in Mexico and Brazil to this the figure would be over 1000 million!
    Perhaps in the following wake-up call for the World some of the further issues might be of interest.
    • The World’s population is expected to reach 9 Billion by 2050: two thirds will be living in Cities.
    • Growth in Road Transportation in China and India and the developing Nations may mean that we will have an additional 1,000 million Cars by 2050.
    • The demand for fuel for Road Transport alone would increase by almost 30%
    • It would increase the emission of Green House Gases from Road Transport by 100%.
    • We could not provide this from Existing known Oil resources!
    • If that Oil was available to exploit for this use alone we would need to have a new supply equivalent to the whole of the Middle East Africa and South America ready by 2030.
    • We do not have that amount of oil available.
    The World is fixated on using personal transport: and the likelihood of it moving away from the internal combustion engine as the main drive system will remain with us for at least 30 years. The potential to use either
    (i) Electrically Driven vehicles is limited due to cost of making the electricity needed, lack of range and recharging,
    (ii) PEMFC (Proton/Polymer Exchange Membrane Fuel Cell) Driven vehicles is limited due to the cost of making the electricity needed and back-up infrastructure.
    As a consequence the demand will be centred on liquid fuels with an increasing shift toward augmenting and then supplanting the existing source with Renewable Fuels.

    Manufacturing the Renewable Fuels (also known as Biofuels involves the use of Biomass or generic plant material to produce a substitute for the refined Fossil Fuel equivalents. The choice of the raw materials used for these is subject to much debate for in the mad rush to produce them the initial emphasis was to look at Food Crops and the Land – that should, in the first instance – be used to Grow Foods or which is used to grow Plants that act as a barrier to protect the natural ecology of an area (such as the Arboreal and tropical Forests. However with the need to kick-start the industry many Governments around the World have provided stimuli to this by subsidising the production of the Renewable Energies and Fuels. This conflict of interests between Growing Crops for Food and Fuel has raised much angst around the World for it has raised food prices.
    So what is the relevance to your article? Think on. Where are these sources of Renewable fuels to be obtained. Certainly not in the majority of existing Middle Eastern Oil Kingdoms. So what are they doing about it? Yes you have guessed it! They are busily investing in them. Well there’s a surprise for it is known that they have been expressing great interest in the newer developments across the Mediterranean Countries from North Africa into the Islands and around the periphery and therein lies the greatest potential.
    For those with a need for security of fuels (and it is nothing to do with anything else) the issue is to have most of these facilities in train by 2020 and that is the task afoot. This then is the competition to the main sources of Emperor Oil and it is why the KSA is so paranoic about the implications of your article.

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