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Saudi Arabia's Oil Wealth Is About to Get a Reality Check (bloomberg.com)
250 points by ayanai 143 days ago | hide | past | web | 284 comments | favorite



Human ingenuity + industriousness > Raw materials, even the most valuable one

Even princes born with black gold will sooner or later be surpassed by organizations run by inventors, scientists, and engineers. The values and abundance generated by hi-tech services are increasing while traditional energy sources are being supplanted by renewables.

“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” -- Sheikh Zaki Yamani, a former Saudi oil minister.


A Sheikh in Dubai said 'My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Lamborghini, his son will drive a Lamborghini, but his son will ride a camel'.


http://www.gluckman.com/DubaiBiz.html

"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel," the Sheikh was fond of saying.


"Shirtsleeves to shirtsleeves in three generations" seems to have equivalent, independent expressions in many languages.


富不过三代 (wealth doesn't last beyond 3 generations) is the Chinese.



You can definitely preserve and transfer wealth provided you are disciplined enough do certain things.

Be careful to not reproduce in excess. This is the main thing. You don't want wealth to divide too rapidly between quick generations. Ensure you invest heavily in training people to teach them how to grow their wealth through age old tested ways: Gold, Real estate, well trained children. Ensure your accumulation rate is above your spending rate.

Modern day trusts too come to mind. Kennedy's, Clinton's, Rockefeller's and Rothschild's of the world.

Wealth doesn't last for long if you don't have the discipline for it. Most people who tend to lose wealth are generally the ones who completely lose a grip on reality. Deviate so far away from the very reasons that bought them there. Bad things happen from there on.


Just a nitpick: gold is not going to grow your wealth, it will preserve your wealth. One ounce of gold is worth about a loaf of bread every day for a year. That was true in the time of King Nebuchadnezzar (600 BC), and is roughly true nowadays.


Invest heavily in creating crop-destroying pests and as bread gets more expensive, so will your gold reserves. Genius!


Yeah and losing this discipline is even harder when going from one generation to the next. The guy who built the empire knows all the sweat he put into achieving it, and he knows how it is to live with nothing. Therefore he has internal motivation to keep his wealth. But his children and their children don't know anything else but wealth. They might not even understand that it won't always be like that.


>Be careful to not reproduce in excess.

You can reproduce in excess, but you have to practice primogeniture.


> Be careful to not reproduce in excess

Or, alternatively, reproduce abundantly and use your children to make alliances with families that actually do matter.

You're advocating having few children in a thread related to Saudi Arabia, a kingdom whose founder had 20+ wives and some 100 children. That is how all the warring clans in the Arabian Peninsula were united and pacified: by marriage.


But we're not talking about pacification, we're talking about maintaining wealth within the family.

An inheritance split between 100 children, and then split again between their children a generation later is going to run out pretty quickly.

Even if it's only 4-5 children per person it will run out within a few generations.


That is a matter of wealth preservation. What about wealth creation? How much Saudi wealth is there without stability and security?

Also, why should all children inherit equally? Marry the daughters into wealth, and make sure only capable sons inherit.


> and make sure only capable sons inherit.

In an ideal world, that's a great idea. In reality, see above about camels, Mercedes and Lamborghinis.


http://time.com/money/3925308/rich-families-lose-wealth/

>70% of wealthy families lose their wealth by the second generation, and a stunning 90% by the third, according to the Williams Group wealth consultancy.

>It takes the average recipient of an inheritance 19 days until they buy a new car


While agree with the general sentiment, there are exceptions. The Shang dynasty had the longest reign in China (554 years). The Habsburg family ruled Austria for about 600 years. Paraphrasing [1]: The Japanese ruling 'family' recognises 125 monarchs beginning with the legendary Emperor Jimmu (traditionally dated to February 11, 660 BC) and continuing up to the current emperor, Akihito. Historical evidence for the first 29 emperors is marginal by modern standards, but there is firm evidence for the hereditary line since Emperor Kinmei ascended the throne 1500 years ago.

[1] https://en.wikipedia.org/wiki/Imperial_House_of_Japan


Interesting...

The beloved leaders have reached the third generation: that could represent some hope to North Korea inhabitants.


The first generation makes it, the second generation preserves it, and the third generation spends it.


Just because he said that, it does not mean he believes in it. It's feel-good baloney.


Just because you said that, it doesn't mean he doesn't believe in it. Support your claims with proof and don't let your biases take over reason.


Proof? How do you prove someone is being sincere?


It's the other way around: you need to prove that what he says is merely feel-good baloney.

Otherwise, every person is insincere, including both yourself and I.

Side anecdote: While I haven't met and talked with the guy in person, I know a person who has. Her impressions of him was that he was an honest man who cared about his country.

Take what people say with a grain of salt unless there is reliable source that backs them up.


It is safe to assume that people with non-trivial power are very seldom sincere when making public statements.

If Dubai's elite's descendants will be riding camels some decades from now, then why does Dubai have a national wealth fund?

The truth is that Dubai's wealth fund may invest in YC or in VC funds, and some of those mocking Dubai's future will be working indirectly for the elites that run Dubai. To distract people from such master-slave reality, a bit of self-deprecation can be charming.


Yes. And this may be the most important part of the original article:

Demand for oil will peak just before then, according to Royal Dutch Shell Plc projections, as alternative fuels and electric cars gain popularity, putting Middle East energy producers on shakier footing.

The minute Tesla and others get electric vehicles to have sufficient range and low enough costs, we're going to see demand for oil go into structural decline. (https://news.ycombinator.com/item?id=13039490)


I feel like said decline will take a very long time. As more of the world is lifted out of poverty ICE powered transpo will become within reach. EV use may explode amongst the global top 1% (>=$33k/yr) but gasoline has a much higher energy density than Tesla's batteries (more portable absent infrastructure) and there is a highly competitive global supply chain for small durable ICE's.

Furthermore, the demand for plastics and hydrocarbons for other uses will only increase with global income levels rising.


> As more of the world is lifted out of poverty ICE powered transpo will become within reach.

I think, if EV prices keep falling like they have been, developing nations may skip ICE cars and jump straight to EVs (similar to how many nations 'skipped' landline phones and went straight to cellular)


Entirely, in my estimation, because you can get cheap and/or second hand cellular phones. Whereas you can't make a cheap and/or second hand landline.

One thing we know about ICE cars is they can be produced cheaply (think moped, not sedan) and there's an endless supply of used copies.


You moved the goalposts a wee bit there; a moped is not a car. Electric vehicles of this class are also cheap, much easier to hack/repair than combustion-driven ones, and do not require much power to charge. Petrol-powered mopeds have advantages of their own, of course (durability, horsepower, range), but it's by no means clear cut.


Sounds like you are only thinking of the cellular phone handset itself. A single cell network tower costs in the hundreds of thousands of dollars. Not sure about the cost of landline installations.


With significant innovation in power generation and transmission this might be possible. Absent these innovations they will follow the path of least resistance and that will be ICE. Time will tell.


As solar and battery prices keep dropping the charge at home infrastructure becomes ever more appealing. Oil on the other hand already has little room to become cheaper.


The capex on a tin can for gasoline will always beat a solar roof and Power Wall


Not when you can rent the solar panels for zero down. Then it's just monthly cost X vs monthly cost Y. Remember, our solar prices are based on western installation costs, 3rd world pays less for solar but does not get a discount on Oil.


Since when did you get your gasoline in a tin can?


Ever been to a 3rd world country?


Yes. Born and brought up on India. In only the most extreme case of a car breaking down miles from the pump would you ever get petrol in a can. Otherwise, the vast majority goes to the pump to refill.


The point is if your going to start consuming petrol on a large scale you aren't going achieve that delivering it in tin cans, you need infrastructure for that as well.


The 2017 Chevy Bolt claims a 238 mile range. The Honda Fit get s 32 city mpg and has a 10.6 gallon tank, for 339 miles of range.

So EV's are not that far behind conventional cars, so the higher energy density of gasoline makes less and less of a difference... especially for commuters since they can refuel at home instead of seeking out a gas station, so they only need enough range to get to work and back (plus a cushion for detours and errands). Our commuter car hasn't made it more than 100 miles from home in its 5 year lifetime.


> The 2017 Chevy Bolt claims a 238 mile range. The Honda Fit get s 32 city mpg and has a 10.6 gallon tank, for 339 miles of range.

One charges in 5 minutes, the other in a night or so.

> So EV's are not that far behind conventional cars, so the higher energy density of gasoline makes less and less of a difference...

I've been told that filling a petrol tank means transferring energy at a rate of about 20MW. This is where it makes a huge difference.

> especially for commuters since they can refuel at home

This may be true for US suburbia. In Europe a lot more people live in flats and park somewhere in the street. Unless we install power sockets in every streetlight, charging remains an unsolved problem for considerable swaths of the population (driving to a charging station is prohibitive -- I don't want to spend an hour+ just passing time).


>One charges in 5 minutes, the other in a night or so.

EV owners often report that charging is more convenient, because you wake up with a full charge every morning. Plugging in to a charging point takes just a few seconds. A rapid charge will get you to 80% capacity in 30 minutes with most cars, but overnight charging allows you to take advantage of cheaper off-peak electricity.

>Unless we install power sockets in every streetlight

Lamp posts with built-in EV charge points are commercially available. A stand-alone charging point takes up no more space than a parking meter. If there's space to park a car, there's space to fit a charge point. Charging is a solved problem, it just requires investment.

https://www.zap-map.com/lamp-post-ev-charge-points-launched-...


> EV owners often report that charging is more convenient, because you wake up with a full charge every morning. Plugging in to a charging point takes just a few seconds.

Well, this plug-in hybrid owner disagrees. I find it very tedious to have to fiddle with the cable twice on every drive.

>> Unless we install power sockets in every streetlight

> Lamp posts with built-in EV charge points are commercially available. A stand-alone charging point takes up no more space than a parking meter. If there's space to park a car, there's space to fit a charge point. Charging is a solved problem, it just requires investment.

True, which is why I mentioned lampposts. But they need to be absolutely ubiquitous. "Some" lampposts don't cut it -- charging needs to be possible literally everywhere, or there will be perpetual fights over the coveted charging parking spots. In my city the curbs are completely full of parked cars at night -- if they all are electric, there'll be a spider web of charging cables. (Also, the charging port on my car is actually on the street side of the car :'-( ).


with 200 miles of range, you don't need to find a charging space every day, many people can charge once a week. And you don't have to charge at home, you can also charge at the office, or grocery store, or any other place you regularly go.


> with 200 miles of range, you don't need to find a charging space every day

Depending on your commute. And the weather -- cold weather essentially halves my range.

Also you need to be more careful with your charge. Because if you run out at an inconvenient time, you're stuck charging for at least 30 minutes -- if a reachable charging station is not occupied.

My BIL was recently stuck in Zürich for a few hours, waiting for a charging station to become available for his Tesla so he could drive home.

Don't get me wrong -- I'd love to have an EV. And I really enjoy my hybrid. My next car will definitely also have electric drive.

But the fact is that dinosaur juice is just far, far more convenient and practical. Certainly now, but probably even in a hypothetical future with vastly improved charging infrastructure.


Huh, Tesla and Bolt owners report a 20% reduction in range in cold weather.


Yeah, I'm sure the relation is worse for my car because of its comparatively tiny 7kWh battery.

20% is still nothing to scoff at, but probably acceptable.


> Unless we install power sockets in every streetlight

That seems the likely solution. Here's a map of points in the UK, many are simply a post next to the street: https://www.zap-map.com/live/


The 2017 Bolt claims a 238 mile range a lot like Lenovo claims my laptop has 10 hour battery life. I'm lucky to get 4 hours with normal use, but if I turn off my music, disable wifi, turn the screen brightness all the way down, don't use Chrome, etc. I'll probably get at least double.


Granted, your mileage will vary depending on your actual driving patterns and weather, but the LA Times got 240 miles on a single charge, and could have driven farther:

http://www.latimes.com/business/autos/la-fi-hy-bolt-ev-drive...

Car and Driver got 238 miles with range to spare:

http://blog.caranddriver.com/how-i-drove-238-miles-in-the-ch...


> Monterrey was cool and foggy...

Leading image from the article article taken in Monterrey neither foggy nor cool looking, instead appears as what would pass for summer in many parts of Europe and Canada.


While foggy Monterey weather may pass for summer in many parts of Europe and Canada, they weren't in Europe or Canada, they were in Monterey. Though I'm not sure what "cool looking" weather looks like in a photo of an automobile with no living creature around.

If you don't believe they saw fog, the video included with the article shows the fog when he's crossing Bixby Bridge, about 30 minutes south of Monterey - skip to the 30 second mark.


Just saying that the mileage is not going to be close to what they are advertising in a cold climate.


Tesla owners report about a 20% drop in range in cold weather. The Detroit Free Press got about half way through a test in freezing (11F/-11C) temperatures with the Bolt before getting rear ended, but they were on track to go 200 miles.

Whether the mileage is 240, 200, or 180, that's still more than enough for most people to commute multiple days. Around 70% of US drivers have a one way commute of 15 miles or less.

http://www.freep.com/story/money/cars/mark-phelan/2016/12/17...


Why aren't Bolt batteries nearly as affected as Tesla batteries? It seems like they would be bound by the same physics laws?


I think they are equally affected -- 200 miles is about 20% less than the good weather range of 238 miles.


A friend who owns a Volt can get from SF to only Mountain View, and then it switches over to using gasoline.


Other than the fact that "Volt" rhymes with "Bolt", why is the all electric range of a Chevy Volt relevant to the Bolt?


Volts electric range isn't for long road trips. That's why it has an ice as a backup generator. It's an electric car for today.

Great car btw. After all incentives and dealer rebates you can get one for ~21k. Has 50 miles of electric range and it's backup generator gets 42 mpg. And unlike the i3 rex it can travel at full speed on gas.


yeah it was the first sensible electric car that wasn't built for wealthy people or green idealists and I seriously considered getting one, but in the end they never reached Italy


Are you sure? A typical phone battery is 5Wh. Let's say it is 5V times 1A times 1h (most of the time the phone does not drain 1A), that's a generous 5W of consumption for a phone.

A Volt's battery is less than 20 kWh, and it has to last several hours, so it probably consumes around 5 kW.

Now take the phone's 5W a base; Even adding 10W to charge two devices, 10W for the bigger display, and 20W for the speakers, I doubt that electronics and in-car entertainment consumes more than 2-3% (150W) of the overall energy needed by the car.

Air conditioning is much more expensive, and the effect on ICE fuel usage is there but practically impossible to measure.


To be clear, I wasn't talking about music, wifi, brightness on the car, I was talking about it on my Thinkpad. I'd only use units of time (hours) to measure a laptop's battery life, I wouldn't use time as a unit for measuring a car's battery capacity.

Taking car rides in my buddy's Volt will only get us from SF to Mountain View, and then it will switch to using gasoline.

How you accelerate/brake/etc, city vs. highway driving, and following distance from other cars ("drafting") can really affect the range...


I think you meant bolt not volt.


I reported numbers for the Volt, but the Volt's battery definitely doesn't last several hours, so the effect is even more negligible.


what is ICE and EV?

*edit:

Okay found it myself through realizing that these two are related.

Internal Combustion Engine = ICE

Electric Vehicle = EV

These are not common terms, though. And googling something that looks to google like "icecream" is hard. Please keep that in mind when using abbreviations.


"The minute Tesla and others get electric vehicles to have sufficient range and low enough costs, we're going to see demand for oil go into structural decline. "

No, sorry.

People have been predicted 'peak oil' and 'peak demand' since the 1970's.

Even a large number of Tesla's wont change that.

You do realize that there are a few billion 'carless' people in the world who are soon going to become 'cared'?

And they live in places that won't care about CO2, either from a policy or populist perspective?

And that there are a million other uses for oil other than family transportation?

The most salient issues in Aramco's valuation are:

1) Regime volatility: taxes etc. - not only will they change, they could change a lot.

2) Production and price volatility: a lot of geopolitical things go into how much they product, and there are massive shifts in prices over time. Booms and busts - not like most products (think Windows OS, or cars - they don't change that much in price)

3) Horizon: we're having to predict so far out into the future, there's considerable volatility just in that.

4) Cost of Capital leverage volatility: in a world of low interest rates, small changes in cost of capital tend to be amplified. Going from 5% to 10% is similar to 1% to 2%. Since we're in an era of very low interest rates, everything gets magnified and ballooned up.

I actually don't believe that alternative forms of energy production or transportation will make a dent in any of it.

There's so many ways to use Oil, that any drop in price introduces those mechanisms and it ends up becoming valuable again.


Peak oil and peak oil demand are two different things though, and I peak oil demand is relatively recent. The original peak oil theory was that at some point the peak production would be reached, after which production had nowhere to go but down. Since demand would continue to increase this would lead to ridiculously high oil prices and all types of terrible consequences. Peak production however never materialized because we kept finding new reserves and new technology to extract more out of fields (like hydaraulic fracturing).

Then the world realized that oil demand will peak before oil production does. It's still hard to predict exactly when this will happen, but it's very different from peak production. Peak oil relied on us not finding new reserves and technology not improving. Peak oil demand on the other hand is based on technology continuing to improve so that the cost of generating and storing electricity will shift a lot of demand away from oil. I think this second prediction is a lot more likely than the first, and it's the reason I never worried about peak oil in the first place. People are really good at coming up with new technologies and lowering the cost of alternative energy sources. So I never bought into the doom and gloom stories of what would happen when we run out of oil.


Electric cars isn't just for environment. It's really nice to have car which doesn't have all these complicated mechanics that wears out all the time and requires so much maintenance. About 2/3rd of the cars I have owned died before they crossed 60,000 miles. There are only few brands and models in market that can pull off 200K miles which means gas powered vehicles constantly keeps you on debt. Have you seen the acceleration in electric cars? Noise levels? It uses magnetic flux for breaking, so no break pads and its far more effective. You get tons of space for storage freed up from space taken up by huge multi-cylinder engines. Add on to the fact that several places offer free changing which is equivalent to getting free gas all the time. If every gas pump offered charging or battery swap then there are exactly zero reasons to own gas powered cars even if you didn't gave a damn about environment.


To be fair there is still huge demand for oil outside consumer vehicles.

Plastic, commercial oil use, energy production, cosmetics, etc.

Oil has many uses beyond powering cars.


Per http://www.americanenergyindependence.com/fuels.aspx "70% of all oil consumed in the U.S. is used for transportation"


Elon Musk isn't building an all electric version of the 787.


It's worth bearing in mind that Airbus does have electric aviation in mind:

http://www.airbusgroup.com/int/en/corporate-social-responsib...

Early days yet, of course, but the groundwork is underway.


I expect commercial aircraft to remain hydrocarbon fueled for the foreseeable future. But jet fuel is only 11% of American transport fuel demand: http://www.eia.gov/energyexplained/?page=us_energy_transport...

(Meaning less than 8% of all American petroleum consumption, given the other poster's 70% figure.)


To me, 11% of all transport fuel demand is a lot! I wonder what the balance is for trains, long haul trucks, are diesel delivery trucks in general are.


Well, I wouldn't bet against him giving it a shot.


Yet


The US is about 25% of the world economy and shrinking fast.

Same for Europe.

EU + US are about 1 Billion of 7.5 Billion people on the planet, many of whom don't have cars, but are about to be able to afford them ...


But for a commodity that's fairly cheap to extract, with production and demand closely balanced and diversified suppliers, even a modest fall in demand can lead to a precipitous collapse in prices as producers fight over market share.


> putting Middle East energy producers on shakier footing.

I thought they were already pretty Sheikhy.


The majority of oil consumption is not by cars, but the transport industry (ships, planes) and plastics. Better replacements for those are not in the horizon yet.


Cars (transport) consume the majority.

If we take the US, which consumes 21% of all petroleum, to understand oil usage pattern, we can see that 47% of US consumption is from petrol (gasoline). Second is Distillate fuel (diesel and heating oil), which accounts for 21%; this is used for industrial machines and heavy motor vehicles, trains, boats etc (diesel) and for industrial heating (heating oil) [1].

These two accounts for the vast majority of consumption (47 +21 = 68%).

The percentage used by transport sector has been increasing [2] over the years:

  2013	63.8
  2004	57.7
  1973	45.4
Does not match exactly (68 vs 64), but it shows a growing trend of transport sector energy consumption. Petroleum as a raw material (plastics) seems to be slightly reducing after peaking in early 2000s.

Source: [1] https://www.eia.gov/energyexplained/index.cfm?page=oil_use [2] https://people.hofstra.edu/geotrans/eng/ch8en/conc8en/oecdoi...


The US consumes a disproportionate amount of oil and especially gasoline - that is not true for the rest of the world. On global average I believe my statement is correct, more data always welcome. For example, China: http://crudeoilpeak.info/wp-content/uploads/2011/08/China_pe...


Mostly false. Private autos aren't the majority of petroleum use, but are the largest share of the largest share: road transport.

About 6% each aviation and shipping.

About 8% plastics and manufacturing, plus more to non-energy uses.

Some generation, residential, and commercial use (much of it heating).

About half to all road transport (1865 Mtoe of 3744 Mtoe). I belive that's about 2:1 private autos vs. lorries.

Oil as chemical feedstocks is fairly substitutable -- an alternative hydrocarbon source, or carbon from, say, limestone, might substitute. Oil as long-distance transport fuel, most especially in aviation, not so much. Shipping once moved by wind, and might again. Overland electrically-sourced rail and possibly trucks might work.

I've got my doubts on the scalability of battery-operated vehicles, though progress to date has been fairly impressive.

Rocketry is another hard-to-substitute option. RP-1 is highly-refined kerosene, and by volume, your best bet. (Hydrogen packs a bigger punch by weight, but requires far larger tanks and cryogenics.) Solid rocket motors tend toward hydrocarbon sources. SpaceX relies on RP-1.

http://www.iea.org/sankey/

http://www.iea.org/sankey/#?c=World&s=Final consumption


SpaceX, ULA, Blue Origin, and eventually Ariane are all headed towards methane.


That's a Mars-driven strateegy, no?


SpaceX claims methane's better for engine reusability (much less soot buildup) but that's as yet unproven. Efficiency is similar to kerosene.


Should be only 85% of the net energy by weight if I understand petroleum vs. alcohol correctly.

Actually, much worse: 46 MJ/kg for kero, 19.6 MJ/kg for methanol.

https://en.m.wikipedia.org/wiki/Energy_density


Methane, not methanol.

Presumably liquefied. 53.6 MJ/kg at your link.


And more on the RP11 vs CH4 tradeoffs:

https://space.stackexchange.com/questions/3161/why-is-spacex...

2004 technical paper out of Germany:

http://arc.aiaa.org/doi/pdf/10.2514/1.2672


Doh!

Too much blood in my caffeine system.

Worse by volume, even liquified: 22.2 KJ/l vs. 37.4 KJ/l kero. Though the mass savings should trade that off some as well.


Isn't "carbon from limestone" basically coal (and then poor quality coal)?


If your interest is chemistry, not energy, then what you're looking for is a large supply of carbon.

Limestone offers that.

I'm not particularly versed in what the chemistry would look like, but if the interest is in, say, providing carbon to coking processes (allowing a non-energy carbon source to be combined with, say, direct solar thermal or electrically-provided heat), which accounts for about 15% of all present coal usage, then you're onto something.

I'm aware that limestone was considered for Fischer-Tropsch fuel synthesis based on nuclear-generated electricity, at Brookhaven National Labs in the 1960s (Meyer Steinberg, I believe, I've written on this and documented much of the literature at https://reddit.com/r/dredmorbius).

For plastics, etc., the situation's largely similar.

I suspect limestone, based on fossilised shellfish, is more abundant than coal, based on fossilised plant matter, given that conditions for limestone formation are probably easier to come by. For non-energy use, this might be a viable long-term option.

And, yes, burning limestone-originated carbon, in the synfuel instance, would be similarly problematic as burning coal is in terms of increasing atmospheric and oceanic CO2 (and carbonate/bicarbonate) levels. I'm mentioning the research interest, not endorsing it. More recent research along those lines looks at carbon recovery from seawater, or possibly atmospheric carbon, though the latter is vastly more energy intensive.


That doesn't seem correct: https://userscontent2.emaze.com/images/63172c5f-0bd8-4e77-a1...

Note: cargo ships don't use gasoline.


Solar augmented boats could make a major dent in their oil consumption. Rememebr they have very tight margins and panels are now cheap. So, if they can cover say 10% of peak power needs the fraction goes up on slower trips which are common.


Doubtful. Most ships have very little free surface area available for solar panels. They wouldn't provide enough extra thrust to justify the expense and weight. Adding an electric motor, clutch, and transmission to the prop shaft would be a huge engineering complication that would drive up construction, operations, and maintenance expenses. Bunker fuel and LNG would have to be an order of magnitude more expensive before solar augmented cargo ships would even begin to make economic sense.



That's just an experiment. It's nowhere near being commercially viable.


Indeed. But give it time. Wasn't self-driving cars "years" away just 3 years ago? Things can move fast. I would say "things can move fast when needed"..but I'm not sure how much need there was to drive the race for self driving cars besides the general interest from the public.


Level 4 autonomous vehicles are still years away. Level 1 - 3 cars can't legitimately be considered "self-driving" in any real sense.


they need a huge blanket to cover their cargo with, that'll recover most wasted surface


You're joking right? Have you ever been at sea in a storm? Have you ever seen operations at a cargo port?


Doesn't have to be always deployed but should be stowed in storm/ports - occasion in wich solar power wouldn't cut anyway

Of course such material doesn't exist etc


Again you've got to be kidding. There's nowhere to store a blanket of flexible photovoltaic cells. Plus the rigging necessary to stow and deploy would be huge, heavy, and expensive. It's just totally impractical, a complete pipe dream.


There are some suggestions that it has already gone into structural decline, although I disagree with most of them as I think petrol products are still the most cost effective way to take a newly industrializing economy to the next level.

It occurred to me driving home today that if Elon screws up and suddenly all of the Supercharger stations go away at once, its going to really put a pinch on owning an electric car. And yet, if he can get to the point where others are building super charger stations because they can make some money at it, then the market flips to electric cars by default.


Even if he does screw up, I would wager that the Supercharger stations would get snatched up quickly during any bankruptcy firesale.


I don't doubt the inevitable decline of $OIL, but I do wonder what the timeline will look like? What will 5 years look like? 10?


Yes. I suspect there will be an inflection point where it falls through the floor, as many countries who need the revenue will break from OPEC.


OPEC does not exist anymore. There is no more real coordination. As a bloc it is basically defunct.


Are automobiles the largest consumer of oil? I thought it was plastic production and heavy industries?


As of 2012, all non-energy uses (including plastics) accounted for 16% of oil consumption. Industry accounted for ~9%. Transportation is ~64%.

http://www.globalpetrolprices.com/articles/39/

That's a worldwide figure. US oil consumption is even more concentrated on transportation.


How much oil is used for consumer vehicles versus industry, plastics, and commercial transportation?



Thanks. This is pretty close, but gasoline is used in industry too.


Heavy vehicles use diesel, ships use fuel oil, jets use jet fuel. What industry are you thinking of that would use amounts of gasoline comparable to all light vehicle traffic? I'm honestly curious but doubtful.


Pretty much everything that's not a diesel truck, oil tanker, or jet.


I subscribe!

Besides, the world could become a better place the day the wahhabism oil-funding fades and vanishes.

With global warming, these are the two most serious threats coming out of our oil-dependent economy.


>Besides, the world could become a better place the day the wahhabism oil-funding fades and vanishes.

Instability and collapse in Saudi Arabia or the wider Arab world would be good for nobody, even if it's inevitable. Lack of oil funds isn't going to make Wahabism go away or reduce the threat it poses, in fact IMHO quite the opposite. A triumphal raised finger in that direction is likely to get bitten off.


I wish them to be busy working for a living and to have no money to waste abroad buying a place in heaven for their princes by building salafist or wahhabit mosques. I do not wish them to collapse as a country... Even if the transition from black-gold to hard working might be very difficult.


If that's your misbegotten model of reality, may I suggest some reading material. Technology is dependent on energy, not the other way 'round.

Vaclav Smil, Energy in World History

http://www.worldcat.org/title/energy-in-world-history/oclc/4...

Smil's Energy Transitions addresses switching between primary sources of energy:

http://www.worldcat.org/title/energy-transitions-history-req...

Manfred Weissenbacher, Sources of Power, in two volumes:

http://www.worldcat.org/title/before-oil-the-ages-of-foragin...

http://www.worldcat.org/title/oil-age-and-beyond/oclc/837625...

Limits to Growth is the old classic:

http://www.worldcat.org/title/limits-to-growth/oclc/70551520...

The 30 year update:

http://www.worldcat.org/title/limits-to-growth-the-30-year-u...

For a view of the political and social realities of addressing limits, I can't recommend William Ophuls, Ecology and the Politics of Scarcity highly enough.

http://www.worldcat.org/title/ecology-and-the-politics-of-sc...

Joseph Tainter, The Collapse of Complex Societies, spells out the more general dynamic.

http://www.worldcat.org/title/collapse-of-complex-societies/...


It is historically true that energy had been one of the most important factors in the rise of civilizations. It is now quite clear, however, that information, genetic, and AI technologies will likely become the decisive sources of power and influence in the world.

Even 'primitive' information technologies like complex language, paper, and the printing press might have played as large a role as energy in history, if not more so.

We can argue that scientific knowledge and its spread is the principal key to industrialization. China clearly had sufficient energy sources to invent the modern world; but Europe had the information and institutions to enable it first.

Energy will continue to be important but its commodity nature and the rise of renewables mean that it is not the most crucial edge that leading nations can use to outmatch one another.


In my experience, history is a far more robust guide than hand-waved speculation or assertion.

China did invent the modern world (mostly), by the way. They just decided not to go the full way, though for reasons not entirely clear.

https://en.m.wikipedia.org/wiki/Science_and_Civilisation_in_...

Simon Winchester's biography of that epic work's creator, Joseph Needham, is highly engaging, and also recommended. It's a lighter read than most the other works I've recommended so far:

https://www.worldcat.org/title/man-who-loved-china-joseph-ne...


You appear erudite and very confident in your interpretation of history. So could you explain to us why you assign greater historical importance to energy than information technologies such as paper and the printing press, which amplified and spread the crucial cultural shift towards scientific methods and experimentation? I favor the latter since energy has always been available--We simply lacked the knowledge to harness it efficiently.

If I may, I'd like to recommend a couple of books about the present and possible futures of human progress as well:

E.O. Wilson. Consilience. https://www.amazon.com/Consilience-Knowledge-Edward-Osborne-...

Nick Bostrom. Superintelligence: Paths, Dangers, Strategies. https://www.amazon.com/Superintelligence-Dangers-Strategies-...


Well, so long as we're on the China theme, there's the point that China, not Gutenberg, came up with paper, printing, and moveable type.

The question of why China didn't take the leap to a fully technical civilisation is ... an interesting one. It's called "The Needham Question" and was essentially what Needham was trying to answer in producing Science and Civilisation. Responses remain ... unsatisfactory.

If you're interested in printing and media (a topic I've been exploring in some depth), there's the rate of growth of publishing in Europe. Buringh & van Zanden provide an account of European manuscripts and books from 600 - 1800:

Buringh, Eltjo; van Zanden, Jan Luiten (2009), "Charting the "Rise of the West": Manuscripts and Printed Books in Europe, A Long-Term Perspective from the Sixth through Eighteenth Centuries", The Journal of Economic History, 69 (2): 409–445, doi:10.1017/s0022050709000837

From memory, the count in 1400 was roughly 30,000 volumes in all of Europe. That's not titles, that's total instances of all books throughout the continent.

By 1500, roughly 200 million, by 1600, ~525m, and nearly 1 billion total books by 1800.

Books were still tremendously expensive in the late 18th century. I believe Wealth of Nations sold for about 5L per copy, which was about a quarter of a labourer's annual wage.

Four factors had a huge impact in the 19th century:

1. Iron-framed presses. Sturdier and higher-output than a wood press.

2. Cheap pulp paper. I believe this came online in the 1830s.

3. Steam-powered presses. Output increased from on the order of 120 impressions/hour to thousands, then 10,000 by mid-century.

4. Literacy. Books do little good if you cannot read. Increased industrial work had created a demand for functional literacy and universal education amongst the masses. Europe's literacy rates rose from ~25% to 90%+ over the 19th century.

The relationship of technology to capability and/or science is ... interesting. Science doesn't always lead technology, and quite often follows it. Thermodynamics is a key example -- it was born of steam engines, and not the other way 'round. (Yes, there are counterexamples.)

There's also the early plateau of a great many inventions and innovations: automobile innovation hit a peak in the 1920s (measured by patents, as well as rate-of-performance or -efficiency metrics), aircraft only shortly after. The DC-3 was first produced in 1935 and remains in active service. Robert J. Gordon (Rise and Fall of American Growth) refers to it as "the most perfect aircraft ever built".

The development of fossil fuel resources required a bootstrapping process, and as with most such processes, a correct sequencing. Coal begat pumps begat steam pumps begat iron begat railroads begat telegraph begat Bessemer steel and dynamos begat electric motors begat oil drills begat tank cars begat pipelines begat internal combustion engines begat steam turbines begat gas turbines.... (Somewhat out of sequence, though you get the general drift.)

The vast majority of all power generation (electrical or traction) still comes from the Otto 4-cycle, Diesel, Parsons-derived steam turbine, or Curtis-derived gas turbine. All of these are 19th century technologies. (Charles Curtis's gas turbine sneaks in just under the wire: 1899.)

There's more than just fuel-based engines, to technology, mind. But the "unlimited potential" of Moore's Law exponentiating capabilities are limited to a small subset of mechanisms.

I've been trying to construct an ontology of technological mechanisms, earlier work linked below lists 7 elements, I'm now up to nine:

1. Fuels and fuel-based systems.

2. Power transfer and transformation. Shafts, levers, wheels, belts, electricity, magnetism, ...

3. Materials: capabilities enabled by virtue of material properties, and constrained by their limits and abundance.

4. Systemic (scientific) knowledge.

5. Process (technical) knowledge.

6. Organisation: Management of both human and non-human systems: governance, military, religion, law, business, finance, and cybernetics.

7. Network and dendritic structures. Comms, transport, trade, information, and electronic networks.

8. Information: sensing, measurement, processing, storing, and transmitting, through natural or augmented means.

9. "Hygiene". I'm still looking for a good word, but essentially, side-effect, unintended consequence, and negative-outcomes management. Pollution, sink exhaustion, systemic disruption, "bite-back".

I'm actively soliciting suggestions or criticisms.

I'm familiar with Wilson (love his work) and Bostrom (somewhat less enchanted).

https://ello.co/dredmorbius/post/klsjjjzzl9plqxz-ms8nww

https://www.reddit.com/r/dredmorbius/comments/5h6fgg/seeking...


I was curious even before seeing your comment so I checked and found this: Mechanical printing press was not widely adopted in East Asia until the 1800s. Woodblock printing was probably much less efficient and the number of books available was perhaps one or more orders of magnitude fewer than in Europe until the 19th century. [1]

My hypothesis: A lack of inexpensive and widely accessible books before the 19th century slowed down China's scientific and technological progress substantially. (Other cultural and governance factors undoubtedly played a role as well.)

By the way, I am not sure if we can say China did invent the modern world. Most of the scientific methods and mindset we inherit today largely evolved and took a mature form in Europe. Without which, most advanced technologies cannot be built upon.

Your 9-factor framework appears well thought out. Any plan to publish its details in full?

I would add Biological-medical systems which allows us to harness the nature of other living beings (taming, breeding, etc.), mitigate their harms (pesticides, antibiotics, etc), and deeply alter them and ourselves (genetic engineering, CRISPR, etc.) [2].

[1] https://en.wikipedia.org/wiki/History_of_printing_in_East_As...

[2] http://nautil.us/issue/18/genius/super_intelligent-humans-ar...


China's utilisation of printing may not have been fully realised. Moveable type, especially, seems to have had only limited use. China's lettering system makes mechanical reproduction much more complicated than an alphabetic system with orders of magnitude fewer characters. And even in the West, thresholds such as creating linotype machines (which literally cast a "line of type") was a tremendous breakthrough in the process of rapidly converting text to printing plate.[1]

I'm still getting up to speed on history, but a big factor was an, IIRC, 14th or 15th century decision to turn inward. For various reasons, China was governed as an integral unit, unlike Europe which was divided amongst many autonomous governmental units -- don't like the (political) weather? Move 20 (or 200) miles. Happened frequently, and was relatively easily done due to ample coastlines and river systems (water was the air and highway network of the day). So right about the same time China was shutting down its invention engine, Europe was firing up.

Francis Bacon lists the compass, printing press, and gunpowder as the three inventions of modernity. All three came from China.

And, if you want to apply my ontology, the compass is information and sensing (magnetic north). Along with time measurement, it made for vastly improved navigation -- not so much a value add as a loss-minimisation -- England launched a bounty for an accurate shipboard clock after a fleet sailed onto the rocks -- the US repeated that feat in the twentieth century off the coast of Santa Barbara in steamships moving by dead reckoning through fog.... Printing is information storage and distribution. And gunpowder is something of a mix of fuel and power transmission. Range weapons offer the advantage to hunters, or warriors, of putting yourself out of range (or reach) of your quarry (or enemy's weapons). Risk mitigation.

China's approach to a number of areas is ... distinctly non-western. Philosophy, science, engineering, and moral philosophy or social sciences, are all distinctly different from the West. Again, I'm not as versed in this as I'd like to be, but the distinctions I've seen so far are pretty fascinating. And I'll definitely give you that the western traditions and philosophy of science appear indigenous. Francis Bacon, his earlier near-namesake Roger, Isaac Newton, Darwin, Linnaeus, Lyell, Faraday, and others, turned Western science and traditions differently.

I'm trying to sort out how to structure and describe the ontology. I've been collecting examples, looking for alternatives (or precursors -- none so far, I may have finally had an original idea), holes, etc.

Your biological-medical area is one I'd classify generally under "process knowledge". See Needham's classification (the Wikipedia article spells it out) for his view, I've got another encyclopedia I'm planning to raid for a western view -- that's on my worklist for synthesis and assimilation.

Genetic engineering is under information:

Information: Sensing (natural and artificial senses), language, speech, writing, maths, logic, formal logic, algorithmic processing, programming, genetic engineering, AI.

The techniques of, say, building and operating printing presses, telegraphs, telephones, radio, TV, computers, genetic analysis, etc., are under process knowledge. That's the physical element of information as opposed to the logical and informational component.

________________________________

Notes:

1. And the linotype process actually involved three generations of copying just to get to the printing plate, a fourth before the final published article was complete: matrix, cast into a type line "slug" which was set into the page form, to create a matte, which then created the actual print plate which impressed the final paper.

There's an excellent documentary on Linotype typesetting here: https://m.youtube.com/watch?v=6wHiddZOfa8

And if you're interested in the history of information, I suggest The History of Information, which is mind-bogglingly good (it's run by a long-time antiquarian bookseller). Warning: time-sink.

http://historyofinformation.com


Just to be clear, the modern world I referred to was the product of industrialization that mostly matured in the 20th century, with automobiles, airplanes, antibiotics, and the likes. Most, if not all, of which were developed upon the foundation of European scientific methods and mindset. Compass, woodblock printing, gunpowder played some roles but less pivotal than many other technologies based on science.

Thanks for the last link. It's very interesting. I wish they would include biological-genetic information that predates hominids as well.


If you're interested in more of what I'm working on, take a swing by https://reddit.com/r/dredmorbius (I strongly suggest the desktop rather than mobile view).

For biological / genetic information, you might find David Christian's Big Science perspective of interest, though he doesn't go too far into detail on that. I'm watching (well, listening to) his lecture series (posted at the Dreddit, as I call the subreddit, also "The Lair"...), which looks into a lot of this.

You'll probably also find the work out of the Santa Fe Institute fascinating, as I have. http://www.santafe.edu I haven't looked into their work on genetics, excessivly, though I think John Holland touched on that in part, also Geoffrey West. There's W. Brian Arthur (economics and innovation), J. Doyne Farmer (innovation), David Krakauer (intelligence), Sander van der Leeuw (cognition and intelligence expressed through cultural complexity), and more.

On the 20th century industrialisation: I still think you can trace virtually all of that to the 1880s.

Automobiles required metalurgy (frames, chassis, body), fuel (petroleum => petrol / diesel), standardisation (a form of organisation, and hugely underappreciated -- interchangeable parts is a massive win), mechanised assembly (a worker with a 40 HP power allocation is vastly more effective than one without), and a prime mover.

Airplanes happened virtually at the same time as automobiles (1901: Model T, 1906, Wright Flyer), and for the same reasons: high power-to-weight ration petrol-fired engines. It took another few years to figure out which end was forwards (France pioneered what's essentially the modern wings-forward, empennage-aft design). The next problem was construction materials. Odd factoid: Boeing originated in Seattle for access to aircraft buiding materials. No, not cheap aviation aluminium from hydropower plants (that came later), but spruce wood. Light and strong.

Another line of development was plastics -- or essentially, synthetic polymers. That again started in the 1880s / 90s (Bakelite), but the big decade was the 1930s (coincident with major oil finds), where most of our modern plastics come from (PVC, ethelyne, nylon, etc.). Which suggests another set of progression for developments for new materials:

Use it materially (construction, missiles, sealant) => burn it => do chemistry with it. That seems particularly the case with fuel-type materials: wood, coal, oil, gas, and arguably, nuclear fissibles.

Electricity as with engine-driven shaft power simply made a whole slew of things possible. Much of it was (and is) mechanical energy delivery, though electricity also provided light, heat, and signalling capabilities (telegraph, telephone, radio, TV, computers). Which suggests another mode of development (this one just occurred ... and is why I like talking things out).

Another area of development comes from sensors and controls (two categories which play into one another). Metallurgy again is a field of application. Puddling furnaces became steal smelters (Bessemer process), became blast and oxygen furnaces. That required both bulk gaseous oxygen and very find temperature controls, possible through improved monitoring of the melt and understanding of blackbody radiation. And improved metalurgy made for much finer-precision and higher-quality products, particularly high-stress components of reciprocating and turbine engines. Modern aircraft turbine blades are grown from single-crystal tungsten elements.

So yes, improved technology buys you something. But ... only so much. Jet aircraft are faster but only recently more efficient than 1950s-era prop-driven aircraft. Heavy-lifting craft still favour props in many cases.

Or as I put the question a ways back: the Saturn V flight control computers formed an interstage ring above, if I recall, the third stage section. The Launch Vehicle Digital Computer (not quite what I had in mind) runs at approximately one one-millionth the speed of present processors.

Question is: what increased efficiencies other than raw weight savings would swapping out those electronics with modern equipment offer you? How much further could the Saturn V have gone, or how much less fuel could it have used, for a millionfold increase in compute power? And no, I'm not considering a redesign of the craft itself (though a comparison with, say, the Falcon 9 Heavy or ITS, fully greenfield modern LVs, might be interesting), but only what additional compute guidance offers an existing design.

The history with automobiles, aircraft, shipping, and other fuel-powered applications suggests limits to high-end efficiencies. Or you could look at, say, weather forecasting, where a similar millionfold increase in compute power (plus much better data acquisition through satellite and ground stations) has ... roughly doubled useful forecasting look-ahead.

Some problems are just hard.

And back to the 20th century explosion: ICEs, steam turbines, gas turbines, and electric motors (and light) seem to have had the biggest effects. China stopped short of these, for whatever reasons. If there's a set of linchpin innovations, I'd look strongly to them.

Thinking out loud: possibly also Haber-Bosch for lifting food-production limits, though that largely didn't kick in until the 1950s and 1960s (see elsewhere in this thread). But China had a fundamental provisioning problem, highly apparent in what Adam Smith had to say about the country in the 18th century.

https://en.m.wikipedia.org/wiki/Saturn_Launch_Vehicle_Digita...


How condescending. Surely technology is dependent on energy, but also energy is dependent on technology (fracking being one example.) They are coevolutionary.


Sure, there's some mutual feedback. But it always approaches some theoretical limit.

Oil, for example, has been utilised since prehistoric times, around the world.

The Chinese had massive gasworks, and in fact pioneered the drilling methods utilised by Colonel Drake in Titusville, PA. They'd achieved depths of 1300 meters using little more than bamboo and some wrought iron.

Drake had iron pipe and steam power for his drilling and pumping. Titusville and the Pennsylvania oil boom required a massive transportation infrastructure -- barrels on mulecart only got you so far. By the mid-1867s, railcars not much different from today's DOT-111 were in use, as well as steel pipelines.

The thing is that steam engines, railroads, tank cars, and steel, all themselves require energy, mostly in the form of coal for transport, refining, and smelting iron and steel. The Bessemer furnace (1856) produced the first high-quality metalurgical steel -- earlier iron was hard, but brittle, and construction based on it (rails, boilers, pistons) had a strong tendency to go their separate ways.

What's simply staggering, to me, is how quickly what we consider to be "modernity" emerged with the increased use of coal, oil, and gas. By the 1880s, most of the fundamentals of the modern world were here: reciprocating engines, the first turbines, skyscrapers, the first automobiles, electric lights and motors, basic coal-tar (and early petroleum) chemistry, and the beginnings of telecommunications and information technology (telegraph, telephone, punch card tabulators). There's an exceptionally strong argument that the modern world was invented between 1875 and 1925 -- there are a small handful of exceptions (lasers, nuclear fission, television, transistors (though vacuum tube valves pressaged them), MRIs, and gas turbines). Pretty much anything else you can conceive of existed, in at least rudimentary form.

You can spend your energies being insulted, or dig into a set of curated works which spell this out. Of the books, I'd strongly recommend Smil's "History" and Ophul's "Scarcity" as getting to the heart of the argument. Smil in particular makes the "approaches a limit" argument in repeated semi-log plots of energy usage growth (and efficiency) throughout his book.

Robert Gordon's The Rise and Fall of American Growth combines exceptionally good history with middling-to-bad economics to cover the US experience, 1870 - 2015, which he divides into three roughly 50-year spans. I recommend that book highly for the history as well (though somewhat less so for economics).

http://aoghs.org/transportation/densmore-oil-tank-car/

https://en.m.wikipedia.org/wiki/DOT-111_tank_car


I would be more inclined to believe that war is coming. Broad regional conflict will spread, fueled by failing puppet states like KSA that are going, not to only to fail, but messily implode.


>"fueled by failing puppet states like KSA that are going"

A puppet state implies that some other state is pulling the strings. Saudi Arabia is controlled by the House of Saud no?


Which is... funded by us. Armed by us. Guarded on the international stage by us. Even when a couple of dozen of their citizens flew airplanes into our buildings, what did we do? Shake their hands and bomb their neighbors. I grant that "puppet" is hyperbole however.


> Even when a couple of dozen of their citizens flew airplanes into our buildings, what did we do?

I never hear a convincing answer to a question: what should US have done instead? Stop supporting House of Saud and let their internal enemies, as radical as ISIS, take power instead, turning the country into another Syria?

Yes, supporting bad guys feels bad - but you have to consider the alternative.


My point is simply that an American populace prepared to accept that, is more than prepared to accept far less.


Where would the Saudis be without the United States?

I don't think "puppet state" is an accurate description, but their fate is heavily dependent on our mutual relationship.


I want to use the term "vassal state" but even that is not very accurate. They seem to have more control over us than we do them.

Our military needs their money to create and sustain critical jobs here and buy billions worth of military tools most of which they barely know how to use.


Something of a client state or co-dependency.

The US relies on Saudi oil.

Saudi Arabia relies on US protection.

Each benefit mutually from petrodollar pricing -- the US guards against devaluing its currency (and reducing the value of dollar-denominated assets within its financial system), Saudi Arabia, and virtually every oil-exporting nation, benefits by not having their currencies appreciate in the absence of any meaningful domestic demand for foreign goods.

There are other elements, though those are the large ones.


The US relies on Saudi oil.

Actually the US does not need Saudi oil. Yes, we do import from them, but we can easily replace them. We get almost 4x as much oil from Canada as we do from Saudi Arabia, by the way.

http://www.eia.gov/tools/faqs/faq.cfm?id=727&t=6


Oil is a globally-traded commodity. Saudi Arabia is 13% of global production, and without that, prices would increase markedly as the marginal alternatives are vastly higher-cost (think $120/bbl rather than the current $50/bbl).

So, while the US may not burn Saudi oil directly, it is absolutely dependent economically on Saudi Arabia supplying a critical share of global oil.

More significantly, as the global surplus producer, Saudi Arabia took over the role the US had played from 1930 - 1971 in setting and establishing global oil prices. The result hasn't been quite so, ahem, well-oiled as the TRO's production quota and certificates of clearance (US Dept. of Interior), but it's been the one handle on extraction volumes, and hence, price, that's been available.


Re: Canada... My understanding is that it's not really accurate. -- much of the Canadian oil is oil that is imported to Canada and either transshipped or refined in Canada subsequently imported.

The other thing is that while the US isn't necessarily dependent on Saudi oil, key allies and trading partners are. Places like Japan, China, EU states, etc. That gives them a lot of strategic leverage.


I'm not sure Saudi Arabia relies on US protection that much these days. At one time yes but they're military build up has been well documented:

https://www.washingtonpost.com/news/worldviews/wp/2016/04/05...

Also they are largely running their own war in Yemen against the Houthis. And it the Saudis that are flying those sorties.




> They seem to have more control over us than we do them.

You're thinking of Israel.


Saudi Arabia relies on happening to be in control of Mecca for its identity, and appearing to be stable for its survival. A productive (regardless of the sincerity) friendship with the US and oil revenue-supplied treasury support those goals. Prestige is important, and often more important than wealth.

Things like additional human stampedes during the Hajj have the potential to end Saudi rule far faster than any relaxation of US support, or even attacks from powerful neighbors.


Its not just the US that helps prop them up its also the UK which has very similar dynamics:

http://energydesk.greenpeace.org/2016/01/15/data-how-guns-an...


They're co-dependent, almost symbiotic. It's never clear who controls whom.


> It's never clear who controls whom

It's as clear as it gets. The United States guarantees the House of Saud'a rule in exchange for military and regional policy concessions.

If the KSA quits, America can pull its security guarantee and the regime falls. If the United States quits, the KSA can...sell Treausries and stop selling us oil?

The United States was 61% energy independent in 2013, with net energy imports falling [1]. We also import lots of oil from Mexico and Canada. The energy threat isn't existentially potent.

Regarding Treasuries, the accounts could be frozen and sanctions levied. Again, power is asymmetric.

[1] https://en.m.wikipedia.org/wiki/United_States_energy_indepen...


The bigger issue is that thanks to our alliance, oil is mostly transacted in dollars.

Every nation state stockpiles pallets of $100 bills as a result. Cut that requirement and allow purchases in Euro, Rmb, etc and the people start unloading dollars.


Petrodollars don't underwrite demand for American dollars. American consumption does. People have dollars because Americans buy with them. This wide base of dollar holders produces a deep and liquid international market.

Compare that with the Euro, which has France threatening to withdraw, and the Renmimbi, which Chinese will sell at fire sale prices for access to international markets their government prohibits them from accessing.

Petrodollars once played a role, but no more. Frankly, it seems like an unnecessary liability held over from when the American economy was dependent on foreign oil.


Are you aware of any good references on this topic? I've found it hard to find good analysis.


Good question, and it's one I'm interested in as well.

I've uncovered some interesting references on the UK monetary crisis of the 1970s -- the UK required an IMF bailout, though revenues from North Sea oil sales helped considerably as well.

There is a bit of similar discussion about US monetary policy from the early 1970s, and I've a stash of J. Econ Rev. or similar articles from economics conferences of about that time which touch on the question, though I'm not sure the information's good.

Steve Keen has good insights in a few areas, as does David Graeber. I've got Keen's book handy, and will take a look through it.

Otherwise, there's the story of devaluations of other currencies throughout history. Joseph Tainter, whom I've mentioned elsewhere in this thread, has a long bit online (YouTube) on the devaluation of the Roman denarius -- specie coin which fell from 99.9% purity to less than 4%. Adam Smith talks of the inevitable debasement of coin in Wealth of Nations. And Robert Newman (a comedian, not an economist, though his work here is excellent) touches on petrodollars and sensitivity regarding them in his History of Oil: https://m.youtube.com/watch?v=GIpm_8v80hw At 21m30s.

Hrm. Nothing in Keen on "petrodollar" or "Bretton Woods", and only a brief, 1929 reference, to the gold standard.

I'd suggest looking up J.K. Galbraith or Philip Mirowski as possible sources, though I'm not aware of anything specific to either of them. Highly-regarded and unorthodox economists.


> If the KSA quits, America can pull its security guarantee and the regime falls.

Well, that's a pretty shitty outcome for the US, so the KSA has a ton of leverage here and they know it.

> The United States was 61% energy independent in 2013, with net energy imports falling...

Yes, and this might be one of the reasons that Saudi oil prices were pushed down. Shale oil and fracking was becoming a problem and they moved to correct that. This also took care of the Canada problem as well, setting back development by another decade.

Don't forget the oil market is world-wide. The US could be self-sufficient but if oil is crazy expensive because Saudi Arabia is on fire that will wreck the economy.


> the KSA has a ton of leverage

No, they don't. It's an existential question versus inconvenience. Trashing the KSA could be spun as a national security or human rights decision.

> the oil market is world-wide

Trashing the KSA would be expensive, but not catastrophic. Rising oil prices would help American exporters. Furthermore, we have laws on our books to ban the export of crude; WTI could be low while Brent soars.


Seriously... we just ate upwards of $6 trillion on a couple of wars that changed nothing for the better, and frankly people already seem largely over it, even as those wars are far from over. Clearly the public is not above being led by the nose when it comes to bombing people they've never met, don't identify with, and maybe even are a bit scared of.


I don't see why dropping support for the House of Saud would require we bomb anyone. We'd garrison Israel, the UAE and Kuwait and let Saudi Arabia consume itself from within. The Kingdom depends on American arms. If we cut those sales off, their security infrastructure starts failing within weeks.

My fundamental point is that American influence over the Saudis shadows any Saudi influence on America.


I agree with you completely. I only mean that since Americans have shown willingness to commit to far more in the name of far less, this would be a trivial thing to lead them into.


Pardon me! (I saw your name and re-read my arguments before responding. I'm used to your points being thorough.)


No pardon necessary, I was being unclear. I can only plead tiredness, and thank you for finding my usual run of post thorough.


The Saudi Terror Clan spends tens of billions of dollars every year on bribing US politicians and retired politicians and military men. It's true that the US people would be fine without any alliance with the STC, but US policy isn't set by the American people.

US policy is set by politicians, bureaucrats, and military leaders. And STC has them well into its palm. That's why the STC can attack us on our own soil, kill thousands of us, and get thanked and rewarded by our leaders.


It's easy to say everything's fine now when the ramifications of this have not played out.

Interest rates are stupidly low now, borrowing trillions has never been easier. If they get as high as they did in the 1980s there will be blood in the streets.


What is a new regime going to do significantly differently? No matter who rules, they are going to pump and sell the oil. Heck, even the ISIS does that with oil under their control.


House of Saud are not vassals of the US, and they don't control the US.

They made a deal way back that the US would keep House of Saud in power, in exchange for their Oil at market prices. That - and the fact that they are allies on 'terrorism' means a degree of mutually beneficial transactions.

Strategic partners, that's it.

The US does things that massively piss of the Saudis - particularly the removal of Iran sanctions. That is pretty much #1 worst thing that the US could do, outside of withdrawing support for them unilaterally.


> That - and the fact that they are allies on 'terrorism'

I think you put the quotation marks in the wrong place. The Saudi government are "allies" with the US on terrorism - that is, they nominally support the US efforts to combat terrorism, which means that the US overlooks Saudi-originating terrorism and instead directs its attention elsewhere.


In exchange for selling their oil at market prices? That's not much of an exchange, given the Saudis have to sell their oil at market prices to someone and the market is entirely fungible. If they sell it to different countries we can just buy the oil those countries no longer need.


"That's not much of an exchange, given the Saudis have to sell their oil at market prices to someone and the market is entirely fungible"

It's a very important deal considering how much Oil they have, and that they could chose to use it as a geostratgic weapon - but really, if the US did not protect them they would have been invaded long ago.

It's not so apparent in 2016, but it was more important way back.

Saudi Oil is sweet, and very easy to access with old-school technology. Nowadays you have off-shore, deep-water, Oil Sands, horizontal drilling etc. etc. that didn't exist.


If I'm not mistaken, the US doesn't consume that much Saudi oil anyway.

So may be it's more about protecting the interests of American Oil companies rather than direct consumption.


The ties surely go deeper than just oil, for example helping to keep the area stable or as least as stable as is beneficial. However I wonder if the recent boom in shale oil in the US might have tipped the relationship in US favor.


Messy civil wars maybe but the major countries and regions have no appetite for war on their own soil and will actively avoid it. China, Europe, India, US, Indonesia, South America, 90% of Africa -- war is neither popular nor desired there, and although imperfect the governments function well enough to prevent it and focus on more constructive endeavors.


IMHO on on the long run, the only valuable thing is information (I'm talking really long run, think multiplanetary). A bit too long to describe all aspects of it, but if you think it through I should become obvious. One of the aspects is that with enough technological progress energy should be abundant, so what's valuable is knowing how to apply it to get desirable results.


I don't know why you think energy will be free. It's a zero sum game that's built into the laws of the universe.


There is a shit-ton of energy in the universe. It's one of the few things that's ridiculously abundant.

Consider: We live on a ball of molten iron. Dig a deep enough hole and you get a nearly unlimited supply of thermal energy.


Very little is unlimited when crossed with exponential growth rates.

Early books (1860s to 1880s) on oil, gas, and coal noteed that tthe United States' coal reserves were good for one millon years, _at then-present rates of consumption._

The rates increased. A few centuries, tops, now.

British coal extraction peaked in the early 20th century.

UCSD physicist Tom Murphy extrapolates human acttivitty to galactic-sscale energy conssumption in fairly short time.

http://physics.ucsd.edu/do-the-math/2011/07/galactic-scale-e...


Yes, but unless you're going to move your house to the bottom of that hole, someone is going to have to install and maintain the power lines to get that power to you.

In that way it's very similar to oil.. no one has to pay to create the energy contained in oil, but they do have to pay to dig it up and distribute it. And yet, oil is not even close to being free.

Edit: a better comparison would probably be hydro.. which also isnt free.


E = mc^2. In the far future I think we'll do fusion and it'll be portable and cheap.


I think you have a wobbly misunderstanding of physics.

Iceland uses geothermal. They have it easy due to geological circumstances, but that's mostly a cost-saving measure. Any country can do the same.

There's also geothermal systems for homes that cost far less that work by tapping the temperature differential in the ground: https://www.thisoldhouse.com/ideas/geothermal-heat-pump-how-...

Oil is expensive because it's a scarce resource that requires a lot of effort to extract, process and transport.


Please refrain from unnecessary, unsubstantiated insults. Rgbrenner's point that geothermal is costly for the same reasons that oil is costly - that is, it takes work to transport the energy in usable form - is valid. You're right that geothermal has a humongously deep supply curve, but that doesn't mean its price will be zero.


I'm specifically referring to the remark you'd have to build your home in a hole, which honestly makes no sense at all.


The point was that if you want energy in your home, you either (1) have to transport energy to your home or (2) place your home at the source of the energy. Since placing your home next to a large temperature differential is difficult, then the future will continue to rely on option (1), transporting energy to your home. And if energy has to be transported, its final price will not be zero, even if its wholesale price is.


Nothing will ever be truly zero cost, but those costs can be minimal.

A geothermal system for your house involves "transporting energy to your home" but the distances involved are so minimal that once installed it's next to nothing.

> Since placing your home next to a large temperature differential is difficult...

Well, that's wrong. Every house sits on top of a significant temperature differential which is why geothermal systems work. In large parts of the continental US the ground deep beneath the house maintains a consistent temperature year round. This can be used as a thermal sink in the summer, and a source of heat in the winter.


A friend of mine just got geothermal for his very ordinary house in a major metropolitan area. It was cheaper than the solar on my house was a bunch of years ago. Your point seems very bogus to me.


Yep. When we are brokers of energy at a scale where it can't be considered infinite, we will also be a fundamentally different species than we are today.

That being said, until we have highly optimized how we utilize that unlimited source, it will remain a scarce resource.


There is also more food than humans need. But there are some starving ones. Distribution is the problem. As for universe, the only meaningful sources are earth and Sun, anything farther away may not exist at all.


Kind of answered this to tedsanders below, but basically I think what makes you win in this zero sum game is information. There are pretty much just two things available in big perspective that can make you win: energy and information. And I think information scales better.


It's not obvious at all. And I spent months writing about such issues in my physics dissertation.

If we're talking about some theoretical far-off future, then I posit that prices should be constrained by the conservation laws of physics coupled with the distribution of conserved quantities in the universe. Greater technical ingenuity may get you more redness or more temperature or more velocity, but it will never get you more mass-energy, more momentum, or more charge.


Didn't want to get too far with this to avoid derailing thread into an AI one, but once you are not restricted with human body you can get a lot more done with much less energy. But that's just some orders of magnitude and it does not matter that much with the exponent.

So what do you use this energy for? Probably want to know more. Energy is necessary for computation but that's pretty much all what universe is - energy and mass. If you know the process of harvesting it (technology = information) then it's not like you need to do some work. The idea of doing some physical work to get something done is getting deprecated. Once you know exactly how to do something, you can set it up. Information becomes results.

So what if there are others that also want to have access to the energy and mass available in the universe, some kind star wars scenario? Technological progress destroys raw power, so it's about who can develop faster. Progress is done through computation. For computation we need algorithm (=information) and energy. Amount of energy influences speed of computation linearly. I'm making an assumption that with algorithm improvements you can do better, much better.


Energy is necessary in any process where you want to decrease entropy.


Is that dissertation available anywhere?

dredmorbius@gmail.com if you don't care to share publicly.


It's not publicly available, unfortunately. I'll send you a copy this weekend. (The main topic is not about the long-term limits of technology, but there is some discussion in the introduction and appendices.)


Human ingenuity needs raw materials to execute industriousness upon.

And if the industriousness does not add enough value to the raw materials, then the financial return from the industriousness will not exceed that from the raw materials alone.

Most new ventures rely entirely on simple trading, profiting (subtracting wealth) without adding any value.

Other than trading the raw materials themselves, these ventures could not thrive unless someone else already had added some value to some raw materals so there would be someone other than commodity owners to sell to.

Plus if a raw material can not be commoditized, there will not be enough to go around.

As valuable commodities go, fuels by definition have always been cheap enough to burn, the value lies with the enormous quantity in essential commerce.


"Even princes born with black gold will sooner or later be surpassed by organizations run by inventors, scientists, and engineers."

Obligatory:

https://www.youtube.com/watch?v=mtcaIA9SU7o

Relevant portion is 0 - 1:20.


Aren't they buying high tech firms left and right?

Like uber?

When I think about it.

Is the culture there linked to the investors?

Just food for thought.


You're living in a fantasy world in which people you admire matter. Try to make fertilizers out of "hi-tech services". Try to eat "renewables". Inventors, scientists and engineers haven't really mattered much since WWII and the Cold War.


> Inventors, scientists and engineers haven't really mattered much since WWII and the Cold War.

What has mattered more? The only reason oil is valuable is because it powers our technology. The contribution of agriculture to global GDP is about 4%. Yes you can't eat a smartphone but absolutely anybody sound in mind and body can grow food. Not so many can design smartphones. And they do matter[0].

[0] https://qz.com/901357/selfies-are-great-but-smartphones-have...


It's surprisingly difficult to grow food at the rate of 8.5 tonnes per hectare (Belgium) without petroleum-fueled water pumps, tractors, and harvesters, natural-gas based ammonia fertiliser, fossil-fuel-obtained potash and phosphate, fossil-fuel-based pesticides. Or water and arable land.

Take all that away and you're Zimbabwe, with 0.3 tonnes.

Humans already command or control some 25-40% of all primary plant production (NPP, or the photosynthetic ceiling), much of that made possible through modern mechanised architecture.

In the works already mentioned (Smil, Weissenbacher), the immense increases in ag productivity through such advances as assisted irrigation, mechanised plows, disks, seed drills, fertiliser, harvesters, etc., etc., are addressed in detail.

GDP, and economic prices generally, are exceptionally poor measures of net contribution and value. (Or of true real costs.)

Northwestern University economist Joel Mokyr, otherwise quite a technological optimist, discusses the failure of GDP to capture the true impacts of, say, antibiotics or vaccines. Their price-based contributions to GDP are de minimus, but their impacts on overall well-being are tremendous.

http://www.nationmaster.com/country-info/stats/Agriculture/C...


Quoting Samuelson, if a man marries his maid, the GDP goes down. That is how smart GDP-based arguments are. Wait until the population gets close to the carrying capacity again, and let's see how your GDP argument holds.

Perhaps you only know tech oligarchs. But if you look at the list of billionaires, you find also mining oligarchs and fossil fuel oligarchs. So much for the argument that raw materials do not matter...

Physicists invented nuclear racketeering, which made them celebrities in the 1940s and 1950s. We live in the age of the MBA, not in the age of the scientist. That golden age is gone, unfortunately.


-- Michael Scott.


Hmmm ... people controlling oil arguably have more power in the world, and possibly more wealth, than people controlling anything else.


That control is tenuous. Do they control the oil, or does it control them? I can imagine numerous scenarios where control of the oil is taken away.


I can see how that could happen, but the reality is that it doesn't. The people controlling oil today are almost all the same as the ones controlling it since 1979, Saddam Hussein being the big exception I can think of.


You can go back further than that.

Gulf Oil was discovered in the 1930s. The current major oil-producing regions: Russia, the United States, Saudi Arabia, and Venezuela, were all majors then.

See Daniel Yergin's The Prize, or Manfred Weissenbacher's Sources of Power.

(Which is to say: I'm agreeing with your point and extending it.)


1979? American frackers didn't exist yet. North Sea production had only become significant a few years earlier (the Brent field was discovered in '71). Petrobras was irrelevant. Venezuela had nationalized its oil industry just three years prior.

My point is, these things can change. Quickly.


But Apple is top because they make the shiniest most expensive trinket, I'm not sure that is that much more honorable or impressive.


Smartphones are revolutionizing lives across the third world. The trickle-down of technology, design and engineering from the iPhone to other derivative modern smartphones is having a profoundly positive effect globally.

https://qz.com/901357/selfies-are-great-but-smartphones-have...


It isn't all great though. My friends are slowly being consumed by their phones.


Others have talked about the taxation faced by Aramco. I also wonder how well Aramco is run.

I've heard government jobs in Saudi Arabia involve coming into the office maybe once a month.[0]

I'm not sure how representative that anecdote is, and I'm not sure if that's standard in Aramco too or not. Even if that's primarily just a factor of the public sector, I imagine it'd make it hard to compete for high quality labor in that ecosystem.

A large company sitting on abundant natural resources could develop lots of inefficient habits... has anyone written about management a/o culture at Aramco?

[0] http://www.npr.org/2016/02/11/466457128/saudi-arabia-turns-t...


Saudi Aramco is reasonably well run, because like all functional companies in Saudi Arabia, it's operated almost entirely by expat labor with a thin layer of Saudis in management and a not-so-thin slice of Saudis sprinkled throughout mostly to fulfill Saudization quotas.

Government jobs, on the other hand, are 100% Saudis and function essentially as a welfare/patronage system.


I had a dinner this week with someone running IPO process, and he was very impressed with how well Saudi Aramco is run. He saw many business of this kind worldwide, and he states this is the best run one.


> I've heard government jobs in Saudi Arabia involve coming into the office maybe once a month.

There are government-paid jobs in the US and other countries that aren't very far off from that.


The rationale also assumes Saudi oil, due to last about 73 years if pumped at the existing pace, will be viable for decades even if global warming curbs the world’s appetite for crude.

This is correct but I think that it understates the actual risk. Even in the absence of sustained coordinated action against anthropogenic CO2 emissions, I find it hard to believe that surface transportation is going to remain dominated by liquid fuels for that long. An EV can go a lot further on a dollar's worth of electricity than an internal combustion vehicle can go on a dollar's worth of liquid fuel. That's even without any imputed price on CO2 emissions. Right now cheap electrical "fuel" use is hindered by the high up-front cost of vehicle batteries, but in 15 years, let alone 50? Time is not on Aramco's side.

I'd believe that Aramco can remain a profitable business even a century from now by focusing on non-fuel chemical products from oil. But oil as a commodity isn't going to maintain its outsized importance in world trade after demand for oil-as-fuel peaks.


Important to note, Saudi Arabia has basically the lowest cost of extraction in the world. While other places need to perform complex engineering and invest huge amounts of capital to extract oil, Saudi Arabia can basically just stick straws in the ground and watch it flow.

So if oil prices decline, Saudi Arabia will be one of the last profitable producers.

http://graphics.wsj.com/oil-barrel-breakdown/

https://knoema.com/rqaebad/cost-of-producing-a-barrel-of-cru...


That WSJ article is very interesting, and I haven't seen production costs broken down clearly like that before. It's curious that Saudi Arabia is listed as having $0 per barrel in the Gross Taxes chart even though there's a 20% royalty and 85% income tax on Aramco. I'm curious if that information wasn't know when the article was created, or if those fees are significantly different than export taxes from an accounting perspective.


I find it hard to believe that surface transportation is going to remain dominated by liquid fuels for that long.

Gasoline motor fuel accounts for somewhat less than half of global petroleum consumption.

If you could wave a magic wand and eliminate gasoline demand tomorrow, the oil business would suffer a catastrophic adjustment/contraction, yes. But it would not go away, it would still be huge and powerful and rich and important. There are a lot of applications where there is no viable alternative yet, and no viable alternative on the horizon.

Here's a perverse idea: falling oil demand and prices due to vehicular electrification could make petroleum an attractive fuel for electricity generating plants. Ugh!


Small changes in oil supply greatly affect price. If oil demand gets cut half, then oil prices plumet to 20$ a barrel and stay there for decades. And then the oil countries go bankrupt.


And who's going to pay to upgrade the grid to handle this mass switch to electric vehicles? Even the "just use solar panels" argument doesn't hold water because utilities are already struggling with storing the energy from non-constant sources (solar/wind/tidal) - and we've barely even gotten started on that front.

The current house and senate have an allergic reaction anytime infrastructure investment is mentioned, so I don't really see a solution to the problem arising anytime soon. I would imagine it will boil down to "oh, we just have to stop regulating the power companies so they can afford to upgrade" - at which point you'll find that dollar of electricity gets you about 1/100th the energy of that dollar of gasoline.


Among renewables, I expect wind to be the earliest and cheapest (at least for the near-future) way to charge EVs. Wind output tends to peak late at night/early in the morning: http://www.ercot.com/content/cdr/html/CURRENT_DAYCOP_HSL.htm...

Conveniently, that's when commuter vehicles are most likely to be parked at home. That's also when local distribution circuits are traditionally operating well below capacity, so there won't initially need to be any distribution capacity upgrades to support night time vehicle charging.


You don't need a grid to run electric vehicles. They can plug directly into distributed systems.


I want your points to be true, but there is NOTHING in history to indicate batteries will see an increase in capacity/decrease in cost similar to other technology products.

It's tempting to believe that all problems are soluble, but it's totally possible for there to be a problem, like "cheap, dense, durable energy storage" that ends up being more than humans are capable of solving.


Sorry you're being downvoted.

On the capacity front, I think your caution is very well founded. Since their commercial release 25 years ago, lithium ion batteries have only increased in energy density by like 2.5x. The vast improvement in battery life of electronics has come from the electronics, not from the batteries. And lithium ion is already near (within an order of magnitude) of its ultimate theoretical potential. Future progress here is going to get harder and harder. No battery expert I know expects future progress to be as fast as past progress.

However, on the cost front, I think there's less reason to be pessimistic. Here the limit is more economics, and less physics. As the scale of production has risen, costs have fallen substantially over the past couple decades. And over the next few years, world lithium ion production is set to triple again with the Gigafactory and others coming online. How much cost savings this brings is uncertain, but there's no theoretical reason that greater automation and scale won't continue to push costs down.

tl;dr: Non-chemists are too optimistic about technical progress in batteries. Future progress will almost certainly be slower. But there are no physical limits preventing prices from continuing to drop with experience and scale.


AFAICT the batteries used in today's EVs are already durable enough and energy-dense enough for mass adoption. The #1 obstacle to EVs becoming truly mainstream is battery cost. Most of EV battery cost is still in manufacturing rather than raw materials. Most manufactured products become significantly cheaper to manufacture as production scale increases. EV battery production scale is increasing significantly in the next few years. I am therefore cautiously optimistic that battery production costs can decline significantly even without fundamental changes in battery chemistry.


Batteries are falling in price rapidly and will probably continue to do so. Some data here https://cleantechnica.com/2015/03/26/ev-battery-costs-alread...

I don't know if you need a huge increase in capacity/kg - present Telsas work ok but are expensive. I'd be surprised if costs don't fall considerably. As to falls vs similar tech products I'm not sure which tech products you'd compare them to. They'll probably fall in price slower than memory chips and faster than railway lines for example.


Then you missed Lithium batteries, which were more than a 2x improvement on state of the art.

But in any case, batteries are good enough today.


> But oil as a commodity isn't going to maintain its outsized importance in world trade after demand for oil-as-fuel peaks.

You think it hasn't peaked already? I mean the last few decades we saw another boom with some second world economies getting motorized, but that's done now. If we are not behind peak already we are so close that it's irrelevant, I'd say.


This seems like a textbook case of "governmental risk".

Very specifically, whenever the Saudi monarchy falls, Saudi Aramco is likely to be worth literally nothing, as the oil reserves are seized by whatever new government comes into power.

Even without the risk of revolution, the fact that there's currently no real difference between the Saudi government and Saudi Aramco opens a lot of ways that current "profits" can disappear fairly quickly.


That's likely part of their calculus. By shelling out shares in a massively profitable company, they tie their interests to the buyers, who are likely to have considerable influence and will further continue to prop up their regime.


This is exactly right. In fact if any of the people running the Middle East were more intelligent, they would've done just that decades ago. Aramco use to belong at least in part to the US until the 80s when it was bought out fully by the Saudis. It looks like they are selling it back in hopes of keeping Saudis a float. But really for how long. On the other hand, I have heard from some Capitalists that it's an easy game if you have money as long as you manage it well. It just keeps making more money and you don't have to do shit. The Saudis are pretty used to this by now, not doing shit, messing up the world, and being rewarded for their misdeeds.


Plus, 25% of the oil produced by Saudi Aramco is consumed domestically at very low prices, as the population of the KSA continues to grow this is apt to increase.


Likewise, would the Saudi government ever let Saudi Aramco fail, or even lose a lot of its 'value'?


> or even lose a lot of its 'value'?

Yes? I mean, unless they're planning to run a pyramid scheme, by selling off a portion of Aramco they will be reducing the value of their stake in Aramco. It's not like a minority stakeholder in Aramco is going to be able to push changes that would result in more value being created.

Things are about to get real for Saudi Arabia. The price of oil will probably never recover the point where their government budget will balance. The whole house of cards comes tumbling down if they piss off their populace by reducing subsidizes and/or introducing taxes.


The Gulf countries have already started implementing VAT on certain goods, and I believe that the UAE will start charging VAT by next year.

And even after they implement widespread taxation, they won't have to worry much about "pissing off their populace". You wouldn't believe just how much they invest in surveillance, weaponry, and military training. Some of the top dogs have their own private armies - usually military contractors - in case of conflict within the monarchy itself. It's crazy stuff.

On top of that, citizens of Gulf countries are usually very trusting of their leaders for cultural reasons. It goes back to the bedouin way of life. As for non-citizens (i.e., expats), they usually keep their mouth shut to avoid ending up on the next flight back home.

The two reasons above are mainly why nothing happened in the Gulf during the Arab Spring. Bahrain was an exception: the motivation there was more sectarian than political. The Shia majority were not satisfied with the Sunni monarchy, and so they wanted to install Shia rulers in their place. It's rumored that Iran was heavily backing a coup attempt, which is why the Saudis were called in.


Increasing the tax rate or any other means to extract more funds from it directly to the government would clearly cause it to lose a lot of value to the outside investors, and is something that a government might do in the future, it's happened in many other cases with similar enterprises around the world.


They would if a new government came into power and decided to seize the means of production.


Isn't Aramco the personal piggy bank of the royal family and Saudi government in general? Aren't Aramco profits used to prop up the Saudi economy and pay for things like major infrastructure projects?

How does all square with being a publicly traded company?


> Aramco, formally known as Saudi Arabian Oil Co., pays a 20 percent royalty on revenues and an 85 percent income tax.

At those tax rates, basically yes.

> How does all square with being a publicly traded company?

Investors must take into the account those problems and change how much they're willing to pay for Aramco accordingly.


How much of this is just a negotiation strategy to lower the amount somebody has to pay to get the shares?

If there were WW3 including total technological collapse, then Aramco will be amongst few ones that could still supply oil easily, as other sources in shallow depths are mostly depleted, hence unreachable with a more primitive technology. Then Saudis will be the only ones that could maintain a civilization somehow resembling ours.


total technological collapse

maintain a civilization somehow resembling ours

Those two things are totally incompatible with each other. Saudi Arabia is basically sand with a bunch of oil wells scattered here and there. After any sort of technological collapse Saudi Arabia, within a few years, once again becomes a few handfuls of Bedouins wandering around on camels.

All the oil in the world won't do Saudi Arabia any good when the fancy equipment for pumping and refining oil needs repair, if the highly developed global supply chain is no longer available. Not to mention the absence of the 99% of everything else Saudi Arabia consumes that doesn't exist within its borders.

This problem isn't limited to Saudi Arabia. It exists everywhere. E.g. the 8 million people in NYC can't exist as they are without electricity. Sure the reservoirs upstate could provide water via gravity 150 years ago, but pretty much nothing else would work.


That's a good points, but....would you count on the stock ownership remaining valid in such a catastrophic scenario?


They could start by building a civilisation in the first place that doesn't treat women, gay people, minorities like second class citizens.


And people could just all get along. And everything just could be good forever and ever. This "could" you used is far into hypothetical that I can't really understand your point here.


Saudi's story has Spain written all over it. Spain once discovered huge silver deposits quickly rised to a major global power but they totally failed to invest in human capital eventually turning a poor country when the deposits were over.

Saudi's downfall is going to be good for entire humanity. Saudi's oil money has fueled wahabism across the world with disastrous effects.


Maybe I'm mistaken and you are surely referring to a different Spain, not the one that established the first global empire, spawning half the globe barely after medieval times, and lasting over three hundred years [0]. I'm pretty sure Saudies (heck even USA) could settle with half of that.

* The Spanish Empire (Spanish: Imperio español) was one of the largest empires in history. It reached the peak of its military, political and economic power under the Spanish Habsburgs,[2] through most of the 16th and 17th centuries, and its greatest territorial extent under the House of Bourbon in the 18th century, when it was the largest empire in the world. *

[0] https://en.m.wikipedia.org/wiki/Spanish_Empire


Does spain still have a global empire spanning half the globe? No, I think their point stands, maybe spend less time name calling people pseudo intellectuals.


I'm afraid I don't understand: as Spain is not a global empire anymore, the previous point (i.e. Saudi Arabia is akin to the Spanish empire in any meaningful way) stands.

I must confess, I find your logic quite lacking in sense or purpose.

On the other hand, I can't see where I called the parent pseudo intellectual. You'd rather look that up as well.


"Does spain still have a global empire spanning half the globe?"

There were no eternal empires throughout the history and probably will never be. Current world dominating countries are still in infancy compared to some empires of the past. Spain was one of the world dominating powers for centuries and that counts for something.


Far beyond the point, which was KSA and the Spanish Empire are nothing alike.

Unless I'm missing a deeper point, for which I'll appreciate clarification.


Read Thomas Sowell here:

---In 16th and 17th century Spain — its "golden age" — the windfall gain was gold and silver looted by the ton from Spanish colonies in the Western Hemisphere. This enabled Spain to survive without having to develop the skills, the sciences or the work ethic of other countries in Western Europe.

Spain could buy what it wanted from other nations with all the gold and silver taken from its colonies. As a Spaniard of that era proudly put it, "Everyone serves Spain and Spain serves no one."

What this meant in practical terms was that other countries developed the skills, the knowledge, the self-discipline and other forms of human capital that Spain did not have to develop, since it could receive the tangible products of this human capital from other countries.

But once the windfall gains from its colonies were gone, Spain became, and remained, one of the poorest countries in Western Europe. Worse, the disdainful attitudes toward productive work that developed during the centuries of Spain's "golden age" became a negative legacy to future generations, in both Spain itself and in its overseas offshoot societies in Latin America.

In Saudi Arabia today, the great windfall gain is its vast petroleum reserve. This has spawned both a fabulously wealthy ruling elite and a heavily subsidized general population in which many have become disdainful of work. The net result has been a work force in which foreigners literally outnumber Saudis.

Some welfare states' windfall gains have enabled a large segment of their own citizens to live in subsidized idleness while many jobs stigmatized as "menial" are taken over by foreigners. Often these initially poor foreigners rise up the economic scale, while the subsidized domestic poor fail to rise.

Do we really want more of that? -----

[1] https://www.creators.com/read/thomas-sowell/06/16/is-persona...


Looking at the chart of largest reserve nations, you really have to commend Canada for being as free and fair as their society is.


Most of Canada's reserves are tar sands which are about as pleasant as the name describes - tar mixed with sand. There's a lot of it but it's expensive to extract. So for one thing these reserves are somewhat hypothetical based on the price of oil. The Saudis are profitable at almost any price while new oil sands projects have a break-even cost of somewhere around $90 per barrel. (http://business.financialpost.com/news/energy/how-high-break...)

Even with the normal oil plus tar sands, oil is only Canada's #2 export behind vehicles, 16% of exports. Canada has a well-diversified economy quite unlike Venezuela, Iraq and Saudi Arabia. Iran isn't terrible but oil is still 2/3rds of their exports.


Saudi oil comes out of the ground in a form that you can pretty much barrel and ship, they have it so easy. Canada's oil isn't even oil, it's more like ashphalt.


Canada's oil is very difficult to extract


Canada is not a free society. There are various restrictions on pornography, just like the US for example. They have no problem with censorship.

Edit: to be clear, I am referring to written or drawn pornography depicting fictional minors engaged in sexual acts. Not photography or video of child abuse, or rape porn, or even bestiality (although I am against the lattermost item being illegal too).


I can say with experience that access to pornography produced by consensual adults is largely unhindered here.

If this is how you draw the line between free and not-free, I can only imagine that your definition of freedom is anarchy.


>I can say with experience that access to pornography produced by consensual adults is largely unhindered here.

Then you're wrong. Drawn pornography that appears to show fictional characters who appear to be under the age of 18 is illegal, and there have been prosecutions under this law. Even such written material is illegal.

My definition of true freedom is anarchy (which is why I am an anarachist), but I accept that there is a different definition under the current liberal democracies of the world, and even by those standards, Canada is not free.


Canada has some pretty minor restrictions. It's not as liberal as Japan but it's not as conservative as Australia.


I wouldn't class being put in prison for mere possession of a drawing to be pretty minor.


These cases are astonishingly rare in Canada. Meanwhile Australia makes large swaths of the internet illegal on the off chance cartoon pornography might show up.


Of all the 'freedoms' we can worry about, as a Canadian, not having the right to see 'hand drawn child porn' is not remotely one that I am concerned about.

The 'real' issue of freedom in Canada is that it's basically the only country in the world wherein it's illegal to pay a doctor to help you. That's actually pretty crazy when you start to think about it.


Ah, I replied to the wrong comment. "Canada is that it's basically the only country in the world wherein it's illegal to pay a doctor to help you" - this is factually untrue. There are private medical clinics in Canada. Doctors are not allowed to bill both provincial health systems as well as the patient at the same time.

Geez, here's a 10 year-old article about private clinics: http://www.theglobeandmail.com/news/national/private-health-...


Here's a 2001 article about the interaction of private and public billing in Canada:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC80881/

My personal medical advice to get get some ice on that burn.


So then because you're not affected, then it's not important? A precedent has been set for this kind of censorship. First governments start to censor the things that people fimd disgusting.

I don't really know what else to say. Most people value freedom, and that in my opinion ought to include the freedom to say things that are 'disgusting'.

Do you think it is right for someone to be imprisoned for it? I'm sure they care, and you would too if you were them.


> The 'real' issue of freedom in Canada is that it's basically the only country in the world wherein it's illegal to pay a doctor to help you. That's actually pretty crazy when you start to think about it.

It's illegal to privstely pay all kinds of people providing public services to help you all ocer the world; Canada defining medicine as that kind of public service is atypical, but I don't see how it's "crazy".


This is not true. Doctors cannot bill both provincial systems and the patient at the same time. But there are some private doctors in Canada.


> That's actually pretty crazy when you start to think about it.

Sucks for the doctors (< 1% of the population) but for patients nobody is stopping you from going to the US/Mexico/Thailand and paying for care there.


> Aramco, formally known as Saudi Arabian Oil Co., pays a 20 percent royalty on revenues and an 85 percent income tax.

No wonder they want to IPO!


85% income tax is more like a skim given how that money's dispensed.


It's a tax dodge. Taxes paid by ARAMCO to the Government of Saudi Arabia are meaningless, because ARAMCO is owned by the Government of Saudi Arabia. However, those taxes can be deducted from US taxes by US companies which import Saudi oil.


I hadn't heard the term "Tesla shock" before this article, referring to lowered expectations for oil companies once people started predicting that electric cars would eventually win out. It's a useful phrase ;-)


I prefer Chevy Bolt Shock myself


Why? Planned Chevy Bolt production is tiny, won't make a dent in petrol markets.


The $2T valuation may have stood if they didn't socially kneecap themselves at every turn while putting themselves at risk of internal and external collapse by funding (and fighting) wars in their backyard.


Can someone explain why they decided to suddenly go public after all these years?


From the article:

> A profitable IPO is meant to anchor a sovereign wealth fund that will, if things unfold as envisioned, generate enough investment income at home and abroad to dominate state revenue by 2030. Demand for oil will peak just before then, according to Royal Dutch Shell Plc projections, as alternative fuels and electric cars gain popularity, putting Middle East energy producers on shakier footing.

So, it sounds like they want to turn their oil reserves into cash before the price of oil begins to fall.


My assumption is to prevent any future sanctions against the Saudi regime. Once the markets and 401Ks are invested in the Saudi oil, the US government will have a lot less options to put sanctions on them as the Wall Street powerful lobby system will block it.


>"My assumption is to prevent any future sanctions against the Saudi regime."

I'm not aware of any impending sanctions by the UN against Saudi Arabia. I haven't even heard this suggested. What would these be for? Can you elaborate?


Good strategic planning shouldn't be driven solely by crisis.


The argument about the Wall St lobby would have been always valid however. I still wonder what triggered this specific timing.


I didn't say anything about a crisis, the question is what would those sanctions be for?


They need cash now. Think of it as preselling oil.


They need money.


The chart is missing Brazil's pre-salt reserves, estimates range from 80b to 170b barrels.


I hope the whole planet (and not just the people who control oil and the media) get a reality check and switch to renewable/green energy sources as we are really poisoning our planet. But since Oil is a big-business the fight to get rid of it before IT gets rid of us will not end any time soon.


It's a bit more complicated than that. Roughly 1/3 of hydrocarbon use in the USA's goes to 'cars', 1/3 'electricity production', and 1/3 makes 'stuff'.

Of the rough thirds, the 1/3 that makes energy is mostly domesticly sourced, which is a good thing. We can ethically produce that as a backup to renewables (safety and reliability reasons).

The third that 'makes cars go' was majority foreign until the 90s. Fortunately we've turned that number around. Electric vehicles don't have the energy density of gas cars yet. If you don't live in the desert of California/NYC/etc, they're quite inconvenient. We need stronger magnets and denser batteries. We can drive innovation in this area by letting market forces act. Qe need to be careful about over regulation, as to not drive reverse progress. I'm very hopeful and happy for electric in this area to dominate.

The final third that goes to 'making things' can't be easily replaced ATM. Hydrocarbon feedstocks to make everything from medicine to lightweight carbon fiber are made from oil. We could possibly produce this domestically and at least be assured it's being done ethically and safely. This is the slowest area of innovation unfortunately, and if you're reading this, in your lifetime will likely not be replaced by a process that doesn't involve hydrocarbons. A breakthrough in this area would be sorting waste materials for recycling, or an electric power source so dense, reliable, and cheap we could capture co2 and turn it into hydrocarbons (maybe nuclear here?)


Making things from hydrocarbons is less of an environmental issue, since the carbon ends up becoming plastic instead of being released into the air. It's still worrying that some clean freak countries like Japan wrap everything in 3 layers of plastic that can't be recycled.


Starts with bloom.bg/1O04ymn


AHAHAHAHA.

They seriously think it'll bring it more than Microsoft, Google, Apple, and Amazon combined?




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