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Saudi Arabia’s Great Run Seems Headed for Trouble (bloomberg.com)
99 points by doener 27 days ago | hide | past | web | favorite | 73 comments



The birthrate dropping is a good thing. This happens to countries that are seeing rising levels in education and security. The Saudi's are not poor or uneducated; great.

It does create a big baby boom problem. They have a big generation that is going to grow old relatively healthy (unlike earlier generations) and wealthy. They are going to be dependent on a new generation that is much smaller and currently struggling with unemployment. So, the good news is that there should be plenty to do for these people when their parents retire. The bad news of course is that at point the saudi's will have some economic issues of having to produce more with less people, while facing issues with their oil revenue dropping.

Other issues that are affecting them are the fact that their cities are becoming inhabitable due to rising temperatures. Regular temperatures above 50 degrees are not very sustainable. They are apparently already planning to create some new cities to address this.

The political situation is of course the big topic. The royal family's power is rooted in oil money. As that dries up, the geo-political landscape in the region will start shifting. There's no shortage of countries in the region with similar issues and competing agendas to address their issues. E.g. Iran and Saudi Arabia is a war waiting to happen. The proxy wars have been going on for decades with the US and Europe having played no small role in the history of both countries. Weapon exports to the Saudi's and other countries in the region are substantial.


> They are apparently already planning to create some new cities to address this.

Unless they plan to build them somewhere else, I doubt that'll help. Large swathes of the middle east will become completely uninhabitable, quite possibly during our lifetime.


They're planning on building dome cities.

https://www.popsci.com/united-arab-emirates-mars-city-pictur...


The article says it's a pilot project for Mars habitats. Though let's assume they were to convert this project to actual domed cities in SA; with a population of 30+ millions I'm pretty sure the majority of people would be left outside.


Saudi Arabia has a 35% obesity rate and rising, so I don't expect their baby boom population to grow old relatively healthy.


I agree but my main consideration is as they grow 25-30 yrs older (when compared to their parents) before the kids inherit their parents wealth. We see this in the united states, as the parents of our baby boomers lived until their kids are almost retirement age and consume anything they saved by paying medical bills we have a large break in the amount of wealth that is handed down. Thomas Piketty researched this very idea in 'Capital in the 21st Century'. As an example, the kids of the baby boomers all have to pay for their own college via debt basically because there is no such thing as a family nest-egg anymore. Very few of the middle class families that were started in the 50's 60's have maintained their wealth through their entire lifetimes with enough left over to kick start the next generation. The idea of taking over the proverbial 'family farm' is dead, every generation now has to start from 0 or negative numbers.


>The Saudi's are not poor or uneducated...;

Also, rather indoctrinated... which can be antithesis of education.


Once they let women drive, the birthrate will drop further still. Also, rising levels of education and declining levels of religious indoctrination will help too.


So, if we take a look at Venezuela's situation, in which a system that worked well enough when oil was >$100/barrel becomes disastrous after the price drops, and we apply that scenario to Saudi Arabia, it looks pretty frightening. SA is far more central to world society (e.g. its role in the world religion of Islam, its role in OPEC) than Venezuela.

Perhaps the world should have done more to help Venezuela, but we at least had the option of ignoring it (or worse). When (not if) SA goes the way of Venezuela, it will be a far messier situation for the rest of us, and I don't think we are even thinking about it, much less preparing.


Many Muslims, particularly those outside the Gulf, are looking towards KSA less for religious guidance. Islamic scholars that are allowed to operate by KSA have been shown time and again to be hypocritical and have little to no dignity. Their judgements and positions change with the whims of the king and crown prince, which lends little to their credibility. The remaining scholars that decide to stick to their principles end up in prison.

For me personally, the only unique thing that KSA has that you can’t find elsewhere is Mecca.


This is true. The general public the world over is realizing that the Saudi scholars are "regulated" by the Saudi government...ergo the foreign powers that keep the ruling family propped up.

They have zero credibility. Mecca and Medina are an exception to this.


A bit off topic but out of curiosity how does this playout? Was there a period of time (in recent history) where Saudi scholars were seen as preeminent in Muslim thought and now they aren't? What kind of impact does that scholarship have? Is it something that would have been read by Imam's and then subsequently disseminated to adherents or is it part of most Muslims religious practice to stay engaged with the scholarship?


Thanks for your perspective, it is much better informed than mine. Mecca/the Hajj was definitely the aspect I was thinking of.


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


Venezuela's oil situation is a Venezuelan government inflicted wound. The production declines due to governmental mismanagement are bigger than the oil price changes.

Crude oil production is down to 50% of what it was when Chavez took power. The refining side is even worse, with gasoline production was down to 17% of rated capacity mid-2018, and much worse since then. The latest report I could find had their biggest refinery operating at 5% of rated capacity, and often completely out of action.

It's not uncommon from late 2018 to now for Venezuela to be unable to export oil for periods because of pipelines and processing plants breaking down from atrocious maintenance.

For just a few of the issues, see:

https://en.wikipedia.org/wiki/PDVSA


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


The US's massive increase in production in 2018 seems to be a pretty natural outcome of the free market.

Oil prices go up. Mind-bogglingly huge investments go into getting previously impossible-to-get oil out of the ground. These techniques get cheaper through scale, experience, and innovation. Now it's possible to profitably use them at medium prices.

(However, in 2014 the US ended a 40 year ban on exporting crude oil. We also would not have seen this boom without a return to more free market on oil.)


It is certainly relevant to the economic situation, but I'm not sure it was done out of an awareness of potential instability in SA. I think it was done more purely for shorter-term economic motives. Which doesn't make it wrong, but I don't think it's evidence of a perspective on a larger situation.

For example, if KSA blows up politically, and it leads to (for example) 6 months of no oil coming out, do we even have the tanker or pipeline capacity to keep Europe supplied?


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


In last 10-15 years, I have seen countless such articles about Saudi Arabia's troubled horizon. The Country has very deep connection with rest of Muslim World - they can hold 'brotherly' Muslim countries such as Pakistan and Egypt hooked on to Oil and Petroleum and can rely on these 'brotherly' countries to get access to their agricultural lands and can create massive 'alliances' with rest of Muslim World at their whim (case in point: Saudi-created and Saudi-led grand military alliance with Muslim Countries).

While I support Humanity's move away from fossil fuels, let's not kid ourselves -- Muslim World (which represents 2+ billion people) as well as China and India are in no rush to give up Fossil fuels. What we see now (drop in oil prices, oversupply) may get corrected over time as the poorer Muslim Nations like Pakistan and Central Africa region stabilizes and industrializes thus softening the blow from any dip in business with West.

As for social development across Saudi Arabia -- this is nothing new. Back in 1960s/1970s, Saudi Government had a modernizing phase where they bought Television and media to the masses. Universities were opened and Education was encouraged. Ever since then, Saudi men AND women have been sent to West and other places for their studies. This modernizing phase is just part 2.

You have to understand something about Saudis, Emiratis, Kuwaitis, Qataris, etc. Average citizen in these Countries may have good amounts of wealth and may get exposed to secular culture, however, at heart, their population is very much conservative and strong supports their Royal Family. Case in Point UAE: Flush with Wealth and relatively liberal -- but local population still appears conservative and prefers to live in their own social circles.

This (GCC) region is part of World where up until the Grand/great-Grand parents of current generation lived in desperate poverty since beginning of time and the society still remembers those harsh times very, very clearly -- given those circumstances and where they are now (almost First world type of living standards), any population of Human beings would be, very, very satisfied by their leadership.


Wouldn’t a meaningful study of Saudi Arabia include the house of Saud?

Anecdotals suggest the House of Saud itself has exploded in size.

Supposedly at a rate far greater that House of Saud’s revenue streams.

Petrodollar recycling programs often in the form of western arms contracts are a way for the House of Saud and insiders to “clip the ticket” on big dollar contracts.

The multidecade Al Yamamah contract worth tens of billions with UK defence industry saw a corruption investigation stopped as a “matter of nationa, security” due to Saudi pressure.

In commerce, financial reporting often includes “same store sales” for retail and restaurants.

I wonder if “average Saudi Prince kickback/revenue generated” would be a valid metric?

I suspect kickback revenue per member of the House of Saud has been in the decline.


It talks about youth unemployment, but also says the birthrate has crashed from 6 children/woman to 2.

Surely 1 would solve the other?

Edit: So according to wikipedia, these are the age distributions:

0-14 years: 25.74%

15-24 years: 15.58%

25-54 years: 49.88%

55-64 years: 5.48%

65 years and over: 3.32%

This suggests to me about the right amount of young adults, not too many, with potential issues in 10ish years time.

Note that "upto 37%" of the population are immigrants, I assume they disproportionately fall into the 25-54 age range, and that that immigration could be controlled to some extent if needed.

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


0-14 years: 14.39% (male 724,904 /female 671,524)

15-24 years: 7.64% (male 408,376 /female 332,986)

25-54 years: 70.45% (male 5,297,201 /female 1,537,300)

55-64 years: 6.05% (male 499,579 /female 87,037)

65 years and over: 1.47% (male 106,739 /female 35,669) (2018 est.)

https://www.cia.gov/library/publications/the-world-factbook/...

Source: https://www.cia.gov/library/publications/the-world-factbook/...


How did their Male/Female ratio get so far out of whack? Especially in the 25+ range!


migrant labour


Imigration has already been controlled millions of people have already been sent back to their own countries. And further restrictions are being put up on which jobs will be open to foriegners. They can't sent everyone back in one go but by adding restrictions each year they are doing it gradually.


> They can't sent everyone back in one go

The KSA is a wealthy absolute monarchy. They absolutely can.


They could do it. But there are limits to the practicality of what they can do. It would kill the local economy in an instant. All those foreign workers are at the core of the productive economy, doing actual work that matters, including much of the dirty and mundane stuff, as well as pretty much all of their construction work. I'm sure it's possible to replace them all if they so choose, but it can't be done in an instant. Dramatic and disruptive changes like that take time, or else there will be huge problems. Replacements will need training and experience. The economy as a whole will need to adjust to the population change, and there will be all sorts of other second- and third- order effects.

It's not just unskilled workers. They rely on many foreign skilled workers too. Two acquaintances of mine are expert concrete engineers. They go out there to work on these building mega projects like the Burj Khalifa, as well as ones in KSA. There is little local engineering expertise; it's all brought in. When you're mega rich, it's easy to do that. It would be better to develop their own expertise and industry and have a more balanced economy, as well as a more secular society that would value such careers, but that takes time as well as the desire to change their economy and society to permit it. It's not clear they have the desire or will to do so.


The old joke is that the foreign workers are the only ones who know how to fix the air conditioner.


Yep, and it's not too far off the mark. Without foreign workers, foreign products and services, where would they be? The country would be largely uninhabitable without western technology for building, desalination, transport, food imports etc. It's a hugely ironic contradiction that it is so critically dependent upon the developed and industrialised world while also simultaneously despising it and working against it in various ways.


They can't because not everyone local has the same expertise or training as the imported foreign workers. For example, in 2017, 40% of the university faculty members were not Saudi: http://saudigazette.com.sa/article/517198


Checks and balances are supposed to protect society against serious mistakes, and the two are so closely connected that we often confuse the checks and balances with the mistakes. A wealthy absolute monarchy doesn't have checks and balances, but mistakes have effects.

The king may have the right to send all the plumbers back to India and wherever they came from, effective on the coming Monday, but he doesn't have the ability to stop the pipes from being clogged.


Right, and a guy who was a prince/princess one day isn’t going to be unblocking toilets the next day...


Maybe in 20 years. The youth from 2000 is now of employment age or just the right age for an uprising.


Perhaps, but none if the other issues are particularly short term.


Forgive the naivety, but after a certain point doesn't cash just make more cash, and didn't the Saudis hit that a long time ago?

I figured they got rich on oil, but could now stay rich through investment.


The problem is much of that wealth has been appropriated as personal assets by members of the Royal Family. A lot of it has also been squandered on extravagant projects that will never have anything close to a real ROI. They _could_ have managed it better and ended up living off it indefinitely, but SA is no Norway.


Your thinking of Norway's approach where the state uses oil to reinvest and pay for future generations.

Saudi is trying to do this by spinning off part of Aramco in to public ownership and by stealing wealth from top officials. realistically they should have started 30 years ago.


Or their investment in SoftBank.

It’s got to be pretty weird to work for or in a WeWork and know what sort of regime you are sustaining.


That would be the case if they were investing the "rent" from extractive industry (oil) in productive industries above-ground. Or even just putting it into the market so that somebody else puts it to productive use. If you do that, you're well-positioned for the day the oil runs out or becomes uneconomical to extract.

But the Saudis have the same problem nearly every other petro-regime has, which is spending that money on unproductive personal property (palaces, fancy cars, private jets, etc.) as well as unproductive state property (defense, mostly). They have built some universities and other public goods, but I suspect it's a small fraction of the wealth that's been extracted.

They have no comparative advantage over other nations in anything other than petroleum, and religious tourism. There's no particular reason why you'd want to build a factory or move your multinational company there. They could create reasons for people to want to do that, but it would probably be expensive (they'd need to have low wages, probably artificially depressed or subsidized, or a very lax regulatory environment, which has its own costs, or both).

In the short term I'd look for them to start borrowing to keep their budget balanced, using the oil still in the ground as collateral, basically. (They're effectively borrowing against future income.) If they do enough of this and build productive, sustainable economic assets, they might do okay. But eventually the cost of borrowing might get high, because as demand for oil falls and extraction costs increase, there will come a point where it's no longer economical to extract anymore and they'll have a load of "stranded assets" on their national books. The day they finally have to write those down will be the real day of reckoning, financially.

If the ruling class is smart, they'll make it seem as though it's all a big Western bankster conspiracy (when in doubt, blame the Jews), not their own long-running incompetence, because the immediate cause of the pain will probably be a debt crisis or default.


I'm no economist, but isn't one of the primary problems here that they don't have a well enough developed and diversified economy to invest in, and expand their economy and benefit their society in a virtuous cycle of investment and growth? They have the option to invest in western companies, but isn't that rather risky? And it's also ultimately just monetary gains; they haven't gained materially as a nation unless they also spend that money on products and services from other nations. Eventually, it's left their economy and been frittered away.

Also, how much is invested versus being spent lavishly on their princes and populace to keep them happy?


The tl;dr for you is that the Saudi people made more people faster than their cash could make more cash. And as an extraction-based economy they made more jobs even more slowly than that. So now they've got a glut of young people, not enough cash to keep them complacent, and not enough jobs to keep them occupied. What do you think will happen next?


Fertility dropped from 3.8 kids to less than 2 in 10 years, or am I reading the chart wrong? Did they put a gov official in each bedroom to lower birthrate or what?

Birthrate of 4-6 is unsustainable (unless, maybe, they're Canada with all that land and resources) but above 2 is needed. Someone needs to work in 25 years and pay social security so old people get theirs.

Looks like stormy seas ahead. They can open the spigot for a while but unless the tank keeps refilling (oil prices might not cooperate) it will run dry.


The earlier we stop the crap about "we have to be above replacement rates" (because of outdated pension models) the better


I'm disappointed you're downvoted. This is a good discussion to have. A lot of problems that we, the human species, face, can be simpler to solve if there are less people!

We have some very clear problems to solve if we have a negative birthrate. Caring for elderly is very hard work, harder, IMO, than raising young children.

When we have a negative birthrate, how do we care for the elderly without it becoming a significant drain on our economy? We can essentially run government programs, like American Social Security, like a Ponzi scheme, because as long as population is growing, there's always more people who pay in than take out.

And, just "saving more" won't solve the problem, because then there will be a bunch of rich old people who can't hire help because there just isn't enough young labor!

Leads to a good discussion!


You could argue replacement rates are not just about pensions, but continuing your society and culture with people that look like you.


What a vain and outdated way of thinking.


Vain might be called wanting to have your own kids too, but I disagree


Does anyone know the fiscal breakeven here?

Aka the price of oil at which the Saudi sovereign is cash flow positive?


This article gets a critical point wrong. The absolute worst thing that could happen to Saudi Arabia is that they continue to have a high birth and population expansion rate.

The source of their biggest threat in regards to social unrest, is that they can't afford to placate their massive population expansion since ~1980. Their population has tripled since roughly 1982 and they have no traditional economy to support that what-so-ever, it's all oil dependent. The worst thing that could happen is that you double that population again rapidly, against a relatively static output of oil and while having still not developed a traditional economy to support the new population.

It's a pretty simple equation. N oil production divided between Z population. Every year that goes by that their population increases and their oil production doesn't keep up, that oil money gets thinner per capita. Boosting the population doesn't boost their economy much (such that doing so enables them to better provide for an aging population), as they have practically no conventional economy.

That's fundamentally why their budget requirement for the price of oil just keeps going up. It's at least ~$80 per barrel now that they need to balance the budget [1], so it's nearing a state of becoming permanently impossible to fulfill their budget demands. Soon it'll be $90, then $100.

They've increased their population by 1/4 in roughly the past decade. That's far too fast of a population expansion rate based on the structure of their economy. What they actually need is population contraction, desperately.

That oil economy is now trapped in hell with US shale production always acting as a price & supply counter that makes it impossible for Saudi to gain ground. The EIA output estimate for the US for 2018 as recently as three years ago was roughly two million barrels per day of production lower than what it actually turned out to be. In one form or another, that's largely coming out of the pocket of OPEC+ (OPEC + Russia). US shale supply will never stop pressing against the price & supply of oil and the US is rapidly ramping up its export capabilities. If the Saudis cut to firm prices, US supply takes it up and takes their price gains away (which may take months or years to fill out depending on the macro situation).

Saudi will expand their population by another 12-15% in the next decade, against this disastrous economic scenario. The outcome is obvious, they won't be able to placate the burgeoning population and over time it'll rip the kingdom apart.

If you cut their population in half right now, they'd struggle to build a traditional economy big enough to put under it in time before there's an oil crisis in the kingdom. As it is, they appear doomed to an inevitable civil war or revolt of some sort.

[1] https://www.spglobal.com/platts/en/market-insights/latest-ne...


> What they actually need is population contraction, desperately.

They also need to stop treating women like being worst than cattle, that way maybe industries other than the ones heavily involved in the industrial-military complex would come and invest in SA (the "women are seen as worst than cattle"-analogy has been told to me by a friend who used to work in SA as part of a defense company).

Also, they need to "secularize" their education pretty rapidly. The same friend, an engineer, told me how one of his Saudi colleagues was telling him and his other colleagues about how they used to teach the Quran in SA's engineering schools. Also, said SA engineer confided in his Western colleagues by telling them that he was a closet Atheist, and if word got out about his non-believe status he would risk the death penalty. You cannot build a modern, wealthy society when you're still threatening your people with the death penalty for not believing in a particular god or religion.


   oil economy is now trapped in hell
And it gets worse because all industrialised countries are trying to move away from hydorcarbon fuels, not without success.

   it'll rip the kingdom apart.
And many middle eastern countries would be delighted, and will covertly aid this process.


>>And many middle eastern countries would be delighted, and will covertly aid this process.

They might be in the middle of the same thing for themselves. Virtually all depend on oil, smaller but richer ones like Qatar, Dubai etc might get invaded, ala Kuwait


The moves away from nuclear and coal are stronger. Consumption of oil & gas is still on the rise globally.


That is true. Your comment motivated me to go dig a bit deeper on the statistics. The EIA data browser is a great tool for that:

https://www.eia.gov/beta/international/data/browser/

Oil consumption is dropping in Europe, stable in the US and rising fast in Asia and Middle East (also in Africa, but it is on absolute terms not very relevant).

It seems more technologically advanced countries are seeing an uptake in new energy sources. If this theory is correct, it is expected that tech will percolate to the rest of the world, and a drop in oil consumption is indeed on the medium-term horizon.

China's push towards electric transportation is consistent with this theory.


Saudi Arabia has always had a history of sectarianism and uprisings like the 1970 Qatif Uprising[1]. While they can deal with their internal problems, I am hoping that without oil funding, Wahhabism will calm down elsewhere.

[1] https://en.wikipedia.org/wiki/1979_Qatif_Uprising


With all of the region in chaos (to which KSA is contributing) the chances of uprising turning into long civil war are not negligible.


You are right in that the article doesn't discuss what is going on with not just U.S. shale oil but also how U.S. oil can be sold on the global market rather than be exclusively for the domestic market as used to be the case.

For Saudi Arabia the deal with America is that the House of Saud get to stay in power in exchange for the oil, it is that simple. If there is this 'uprising' that you speak of then it will be Uncle Sam's job to put it down.

The original deal goes back to the time when Britain was supposed to have Iran and the U.S was supposed to have Saudi Arabia. On the back of this deal the Saudi 'Royal Family' have built some myth of entitlement to the throne and being a proper 'royal family'. It is an illusion, there is no legitimacy there. So long as they wear the 'traditional' outfits and keep the 'traditional' laws nobody is going to see that the emperor has no clothes.

I don't get the impression that there is any type of organisation against this so-called 'royal family' with a class of people clued up as to how to live in a non-feudal society. They are far from socialist, mere serfs in an offshoot of empire, relatively rich because that is where the oil comes from. They never had industrial capitalism, they went straight from sand and a bit of tourism revenue to the monster of finance capitalism, trickledown economics and everything that the IMF demands. Because of the oil they do get a few empty gifts from the system such as cheap petrol.

For decades those dollars have flowed back to the West in arms sales. To an extent this clawing back of the money has also happened with luxury goods too. So the serf-grade workers of Saudi Arabia are doubly screwed, when this imaginary 'uprising' happens and they impose a government that 'shares the wealth' they will find it has all been spent on underground aircraft hangars and bits of paper that are allegedly investments in the Western stock market.

My favourite fact regarding oil is how it all went wrong in the 1970's with the oil crisis. What only a careful reading of the Wikipedia article tells you is that the US increased grain prices 300% to pay for Vietnam. This was bad news for the OPEC countries, places like Iran had kind of got used to affordable wheat. This wheat had kind of covered the U.S. balance of payments for oil imports before Vietnam, so it had been a happy arrangement. Our history tells the 1970's oil crisis very differently, forgetting the wheat price hikes.

As the article states the government can make quite a few concessions, e.g. women driving, allowing people to go to the theatre, that sort of thing. They can buy off those that might resent how things are going by these concessions yet still keep a tight grip on the deal which is essentially oil for arms and food.


> grain prices 300% to pay for Vietnam

Nice historic trivia here, a genuinely thank you for the info, I for one wasn't aware of that connection. Wasn't the same hike in the price of US wheat partially to blame for the wheat shortages experienced by the USSR in the second half of the '70s?


I don't see how that follows - Lysenkoism and general taking of labor for granted. The USSR had a heavy practically mercantalist economy. Either they produced too little or exported too much.


> Either they produced too little

I think they produced too little and at some point the US wheat market became off-limits for them. There's this Wikipedia article [1] stating how because of a failed crop the URSS basically bought everything they could get their hand on from the Chicago Mercantile Exchange (this was happening in 1972), and I also found this 1982 Foreign Affairs article [2] that detailed the reasons why URSS had become a net grain importer by that time. Also, apparently Russian PM and economist Yegor Gaidar said that the fall of the URSS was partially caused by the "wheat situation", combined with a decrease in the price of oil in the 1980s [3]

> But there was a more immediate explanation for the collapse of the Soviet Union provided by Yegor Gaidar, who had been acting prime minister of Russia from June of 1992 to December of 1992 and a key figure in the transformation of the Russian economy. In his last work, Collapse of an Empire: Lessons for Modern Russia, published in 2007 Gaidar provides a powerful explanation for the collapse of the Soviet Union. Soviet agriculture had stagnated in the 1980's but the demand for grain in the cities was increasing. It was necessary to buy grain in the international market. While the price of petroleum was high it was feasible to finance the purchase of grain from internal sources. When the price of petroleum fell in the late 1980's the Soviet Union needed to borrow the funds from Western banks to purchase the needed grain. This severely restricted the international activities of the Soviet Union. It could not send in Soviet troops to put down the rebellions against communism in Eastern Europe because such an action would have resulted in a refusal of Western sources to lend the money needed. Likewise the attempted coup d'état was doomed to failure because the coup leaders would not have been able to borrow the funds needed to stave off starvation in the major cities.

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

[2] https://www.foreignaffairs.com/articles/russia-fsu/1982-03-0...

[3] http://www.sjsu.edu/faculty/watkins/sovietcollapse.htm


Random factoid: IIRC, part of the backstory of the 80s movie Red Dawn was a failure of Soviet agriculture, which then motivated the invasion of the US.


I don't think the recent liberalisation is about buying people off. I think it's a recognition that if they're going to establish anything like a real economy, women are going to play a huge part in that because so much of their human capital is locked away in the female population. They’re dramatically more entrepreneurial and better educated than Saudi men.


> they’re dramatically more entrepreneurial and better educated than Saudi men.

How can that be if they've been locked up into their homes until recently? (To my limited understanding of KSA)


A bit over half of University graduate students within KSA are women and they generally achieve higher grades than male students. There are also tens of thousands of female students studying abroad. Their education is largely segregated within the kingdom, but they also have at least one all-female university. However less than 10% of the work force is female, so there's a huge reserve of expensively trained unused female talent.


> generally achieve higher grades than male students

Because they follow rules obediently. That same tendency nets them lower salaries, with a conciliatory style during negotiations.


Benefits the economy even more.


> For Saudi Arabia the deal with America is that the House of Saud get to stay in power in exchange for the oil, it is that simple. If there is this 'uprising' that you speak of then it will be Uncle Sam's job to put it down.

That certainly used to be the deal. The US no longer has any need of OPEC oil. The US got 3.3 million barrels per day from OPEC in 2017, down from 4.2m in 2012. I haven't seen the last two months of data for 2018, but I believe that fell below 3m per day for 2018. That will drop by another million barrels per day over the next few years.

US oil production is estimated to climb to 16-18 million barrels per day over the next eight to ten years give or take. OPEC now stands in the way of the US maximizing its oil position and the value of its enormous production.

The US will benefit from destroying Saudi Arabia at some point. US global hegemony (courtesy of energy production) is increased if you permanently decimate Saudi Arabian oil production. All the countries that need Saudi Arabia's oil, including China, will find themselves into an economically compromised position and require US oil to fill the demand.

Between now and the switch to all-electric vehicles globally (20-30 years), the US is economically best served to deplete as much of its oil as possible.

If you're a nefarious US looking to increase your power, the only question would be the ideal time to pull the trigger and collapse them. You boost US production from 12m barrels per day, to 18m, and slash Saudi down by six plus million by turning their country into a war zone.

18m barrels per day times $85 oil = $1.53 trillion

Versus today's 12m barrels per day at $50 oil = $600 billion

Over ten years, that value gap is reasonably $8 to $10 trillion. How much are Exxon and Chevron (2 of the 3 largest holders of acreage in the Permian) worth under that 18m * $85 scenario?

Or push it a notch further: 2029, 20m barrels per day at $100 oil (equivalent to maybe ~$60 in 2004, a tolerable inflation adjusted level). $2 trillion per year, the size of Italy's whole economy. It would pour a bonanza of epic proportions into the domestic US economy. I don't believe either 18m or 20m barrels per day of US production can co-exist in the next eight to ten years with Saudi Arabia's ~10-11m production (much less their desire/fantasy for more production at a higher price to keep up with their budget).

Simple question: what will the US do to realize that value potential? It'll certainly not be concerned about the collapse of Saudi Arabia, putting it mildly. Cynically or not, there's a popular opinion about what the US is willing to do as it pertains to oil; what then will it do for its own, massive, direct benefit re oil? That benefit scenario is several fold better than just ensuring oil supply from overseas as in the past. The days of (non-Canadian) foreign oil being a strategic critical are nearly over, which means the US allegiance to the Saudi deal is running out. Everyone knows how willing the US is to flip such an allegiance when it's convenient, there's no scenario where the US will feel bound to continue with that after it no longer serves the US interests.


That doesn't really make much sense. As the biggest global consumers of oil, US businesses and the economy in general benefit more from cheap oil than from expensive oil. Furthermore a Saudi in chaos can't act as a regional counter to Iran and pro-Iranian forces in Syria, Iraq and Yemen. A civil war in the kingdom would undo decades of American power broking and defense alliance building in the region and leave it wide open to exploitation by America's rivals. Bear in mind SA and the gulf states have huge Shia populations.


Does anybody here think the US doesn't operate by special interest lobbying?

At 16m-20m barrels per day, the interests served by that much oil production at $85-$100 prices, is pretty clear.

The US economy can easily tolerate $85-$100 oil circa 2029. Inflation adjust that back 25 years to 2004, you get maybe in the realm of $50-$60 oil. The US will be less oil dependent in 2029 than it is today or in 2004, continuing its existing trend line of a lot more economic output without a corresponding increase in oil consumption.

$10-$15 billion in annual arms purchases from Saudi Arabia is meaningless against $1.5-$2 trillion in annual domestic oil production in my scenario. They'll just bump the US military budget to offset the difference.

Your last section, describing how the US needs Saudi as a regional counter and stabilizing agent, assumes the US acts with particular long-term rational behavior in its pursuits. When have you ever seen that be the case in the post WW2 era? It's rare. We wouldn't be in the situation we are now with Iraq, Syria, Iran, et al. if the US behaved the way your theory proposes. The scenario one would expect based on the last 70 years of US behavior, is instigated chaos (whether originally intentional or not).

Exxon and Chevron (not to mention a dozen other relevant oil companies) are far richer and more politically powerful than Lockheed Martin.


So when it suits your pre-conceived ideas the US acts predictably in support of establishment interests, but when it doesn't the US acts irrationally against it's own interests. If it's irrational, how can you predict anything about it's behaviour?


I think the central issue is that the US is highly susceptible to special interest lobbying. Yes, I believe you can take that bet to the bank. We see it every day in Washington and across most segments of the system (from security to various industries to domestic and foreign policy).

There's no conflict between that and the routinely chaotic and irrational foreign policy of the US. They can both exist side by side. Some of the foreign policy irrationality is in fact caused by domestic lobbying, we've seen that throughout post-agrarian US history where the US Government intervenes in foreign affairs on behalf of powerful domestic commercial interests. A further cause of that foreign policy irrationality is at least in part due to administration changes over time, with which agendas change. Adminstrations change, domestic lobbying continues. If you need to think long-term, and you change plans every four to eight years or similar, you're inevitably going to get chaos and wild unintended outcomes. Consider all the plan changes from Bush to Obama to Trump in Afghanistan. I'm not arguing that their goal is necessarily chaos, rather, it's the inevitable product of the approach.

I'm not arguing that acting on behalf of domestic oil interests that might want to see Saudi's output hampered, is rational. Indeed, that might very well be another ideal example of irrational, dangerous behavior that could cause more instability. When trillions of dollars are at stake, one thing you can assume is lobbying toward the dollars will be involved.

I don't believe there's any meaningful US Government loyalty to Saudi Arabia beyond a matter of oil convenience. Trillions of dollars at stake over time as it pertains to domestic oil production, is worth a lot more than the arms purchases from Saudi Arabia. As the US oil production figures continue to rise year after year, the powerful interests represented in that will want higher prices. Their influence increases as the production does (and Saudi's influence declines).

Saudi is set to become primarily a competitor of one of the largest, most important industries in the US. Rather than a relationship of shared security (they get system security, we get oil security), it'll become a relationship of growing animosity / tension, which we're already seeing the early beginnings of (Congress being willing to invoke its war powers to try to force an end to the US support of Saudi re Yemen; and their increasing willingness to criticize Saudi generally).

When it comes to the rest, why should the US care about Syria strategically? The US should have never been over there in the first place. The only people that want us there are the war hawks.

The next administration after Trump will yield more new chaos, as plans and agendas change. It's the inevitable consequence to being perpetually in a position of war and meddling in foreign nations. You're always there as a nation and the people controlling the meddling come and go, with each change lighting new unintended fires. I'd argue that any involvement choices made in the Middle East other than to entirely pull out of the region, are by default irrational. There's no winning or rational direction if you're doing what we're doing, only fires to constantly be put out while you're in the muck of it.


> Between now and the switch to all-electric vehicles globally (20-30 years)

I haven't seen anyone seriously predicting sea and air transport fully going electric in that timescale - current tech would require massive amounts of rare earths and isn't really viable as regards air yet I don't think. There will likely still be reasonable demand for kerosene and hopefully LPG if we can get sea transport off bunker fuel.




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