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Is the Saudis’ Greatest Fear Coming True?

84.3 Billion Reasons Every Investor Should Love Oil

Written by Keith Kohl
Posted February 13, 2019

What is Saudi Arabia’s greatest fear?

It’s not being called out by the international community over murdering a journalist.

It’s certainly not over the fact that women in the country were able to vote for the first time only a few years ago or were allowed to drive a car starting only last year.

The answer... is camels.

You see, neither of those first two things is more frightening to a young Saudi prince than the prophetic words spoken by the UAE’s second prime minister, Rashid bin Saeed Al Maktoum, who ruled the emirate for over 30 years.

After watching his country’s oil wealth explode once production began in 1969, he made his now-famous remark:

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.

Is the Saudis’ Greatest Fear Coming True?

The remark is a stark reminder that oil fortunes don’t last.

Oil was discovered in Saudi Arabia way back in 1932, when Standard Oil of California struck a gusher in Bahrain.

And the mighty Ghawar oil field, easily the largest conventional field in the world, first began pumping crude oil to the surface in 1951 — 68 years ago!

Now, I often joke about Ghawar being the world’s largest wishing well because of the massive amount of water they have to pump down their wells to keep the crude oil flowing.

The Ghawar field alone accounts for roughly 5 million barrels of Saudi Aramco’s daily output.

We’re talking about half of their total daily production!

Keep in mind that Saudi Arabia’s oil industry accounts for 90% of the kingdom’s export revenue, almost half of its GDP, and nearly 90% of the government’s budget.

You can understand why they’d be just a little bit worried.

But are the cracks in this dam finally starting to worry the royal family?

Perhaps.

After all, Saudi Aramco’s field data is one of the great wonders of the modern world. They closely guard those numbers as if the country’s future depends on it, because it truly does.

There’s really only one thing to do: look somewhere else.

Coincidentally, that’s precisely what the Saudis have been doing.

And we know 84.3 billion reasons why they’re setting their sights on the United States.

84.3 Billion Reasons Investors Love Oil

A few years ago, we talked about a new oil oasis that had opened up for Saudi Arabia.

Naturally, the story was little talked about in the mainstream media; it managed to capture maybe a headline or two before it was swept under the rug for some juicy political mess that has come to saturate our life today.

What everyone missed was Saudi Aramco taking full control of the United States’ largest oil refinery.

The Port Arthur facility in Texas processes roughly 600,000 barrels of oil every day. It was an incredibly strategic move on the part of the Saudis.

Do they finally see the writing on the wall?

If so, the Saudi royal family is taking measures now so that those young princes will continue riding in a fleet of golden cars.

But does it really surprise you that the Saudis are trying to capitalize on the biggest oil boom right now?

It shouldn’t.

Last year, Texas companies extracted a total of 1.54 billion barrels of crude oil.

With an average WTI price of $54.79 per barrel in 2018, that’s more than $84.3 billion worth of crude that flowed out of the Lone Star State’s upstream sector.

To put a little more perspective on the sheer size of this oil boom, consider that four out of every ten barrels produced in the United States today come from Texas.

In the Permian Basin alone, output stands around 3.8 million barrels per day.

Yet there’s one huge problem for them that is threatening to put a cork in this oil boom.

Nobody is doubting that production growth in the Permian Basin could continue for years to come. Right now, there are over 4,000 wells there that have been drilled but have not been completed.

The problem isn’t getting the oil out of the ground.

It’s getting the crude to market.

We’ll lay it all out on the table next week, including how a small group of select investors are taking advantage of the situation.

But since you’re a valued member of our investment community here at Energy and Capital, I’m more than happy to give you a little sneak peek right here.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

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.

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