Saudi Oil Greed
An Impending Export Crisis
For the last few years, we've grown increasingly skeptical about Saudi Arabia's future energy security.
But it wasn't until recently that we learned just how bad things have gotten for the Saudis...
Some of you may recall the Saudis are willing to pony up over $100 billion on a wild solar gamble, all for the chance to sell more barrels of oil going forward.
The logic is sound: The less oil they consume domestically, the more they can ship overseas — and the more export revenue they rake in as a result.
The country saw a cool $347 billion in oil sales just in 2012, and they're not about to throw the towel in on that kind of wealth from crude exports.
How desperate have they become?
In February, we learned the Saudis are seeking the help of Japan to develop nuclear technology; in exchange for shipping more oil their way, Japan is offering their nuclear expertise (if you can call it that). Never mind the stigma attached to nuclear in a post-Fukushima world, the Saudis are going to have to go along with it.
The truth is they're running out of time.
Desperate times call for desperate measures.
Saudi Lies Lead to an Energy Crisis
I want to be clear that this situation has absolutely nothing to do with the Saudis running out of oil underground (granted, it's difficult to believe they aren't fudging the numbers; that the 265.4 billion barrels in reserves isn't a farce — or that the amount of seawater they have to inject into the huge Ghawar oil field doesn't make it the world's largest wishing well)...
The problem is on the demand side of the equation.
Saudi Arabia's demand rose 4% last year. At this pace, they'll be consuming more than three million barrels per day by 2020 (and note: these estimates are extremely optimistic).
This demand is stacking up to create a serious energy crisis for the Saudi Kingdom.
We know all too well how hard it is to kick an addiction to crude, don't we?
Below, you can see how valuable oil and natural gas will to the Middle East (click table to enlarge):
In ExxonMobil's energy outlook to 2040, oil and natural gas will still account for 95% of demand for countries in the Middle East. Between 2010 and 2040, oil consumption will rise 49% — while natural gas demand jumps 97%!
Furthermore, most of the Saudis' future energy demand is for transportation, but rather in the industrial and residential/commercial sectors.
That doesn't bode well for Saudi export revenue — not only in the future, but for the time being as well...
The Saudis need higher oil prices. To achieve this goal, they won't be able to increase production without flooding the oil market. But lowering production will have a negative impact on export revenue, and oil revenue is expected to drop 19% in 2013.
Here's the kicker: Along with having to spend hundreds of billions of dollars in alternatives like solar and nuclear, the Saudis still also have to appease the masses.
The country has already promised $500 billion on social programs to its citizens. How are they going to fund these programs without steady revenue from crude?
Likewise, there won't be money lying around to bribe the public if exports begin drying up, which is exactly what might happen.
Revenge on Saudi Greed
Although Saudi Arabia's energy security is headed right off a cliff, the United States hit its own turning point...
Also in Exxon's report are projections on North America: oil demand here is actually expected to decline.
We're actually turning the tables on OPEC. Saudi demand growth is on an unbelievably unsustainable path, and the very thought of Saudi Arabia having to import oil from Uncle Sam at some point in the future is enough to make us giddy.
Just imagine how valuable U.S. oil and gas companies will become if we're the ones gouging the Saudis...
That's what made me put everything else aside to prepare my newest report. It details how you can take full advantage of Saudi Arabia's growing appetite for crude.
Look for it to hit your inbox Thursday morning.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.