Right now, outsiders, up to the US president, are trying to steer Saudi Arabia’s oil policy. Unfortunately, the two topics are significantly contradictory. Many politicians, scientists and climate activists have argued that Saudi Arabia should not invest in additional oil production capacity, while politicians, economists and consumer activists have called for increased production.
This is evidenced by the titles of the fight. “Saudi Arabia resists calls to reduce oil investment.” WSJ 10 / 23-24 / 21 a9 և “White House Calls on OPEC to Increase Oil Production as Gasoline Prices Rise” CNBC 8/11/21. In response, the Saudis announced plans to reach zero carbon emissions by 2060, but in the near future they decided not to increase production from what had already been agreed with its OPEC + partners.
It is reminiscent of the visit of US Secretary of Energy James Schlesinger in 1978, who explained to the Saudis that oil on the ground was more valuable than money in a bank, and at the same time urged them to invest in greater production capacity. In other words, urging them to go the way he thought was unwise. Fortunately, they did not accept his request, as demand for OPEC oil collapsed shortly after the Iranian revolution tripled prices and plunged the world into recession. (Picture below)
And the advice that oil should be left in the ground, as its value will rise more than financial investments like treasury bills, was not so good. As far as I can tell, it was based on an article on oil prices. During the four years that US inflation was high, the dollar fell, and government bond yields were consequently bad for foreign investors. When oil prices are high, it seems that the preservation of oil gives a good return, especially if compared to the period of low prices. From 1998 to 2008, prices rose 19.1% year on year over inflation. From 2010 to 2020, the price decreased by 8% per year.
Until recently, the EIA used the assumption that oil demand that could not be met by the rest of the world would be met by Saudi Arabia. The figure below shows how the DOE’s assumptions about Saudi Arabia’s future production capacity developed (actual production not shared by OPEC countries). As world demand for oil grew, it was assumed that Saudi production would grow tremendously. Instead, Saudi Arabia’s oil demand has repeatedly fallen short of expectations, often sharply.
It is unclear how much money Saudi Arabia has lost by investing in unused power, but whether they hardly considered the DOE (և other) forecasts to be tens of billions, the money they would undoubtedly want. to have now. (I am sure)
Which leads us to the current argument that investment in oil production should be halted if the NetZero2050 global goals are met. As I mentioned earlier (the forthcoming EPRINC newspaper will go into detail), even if that happens, it is more likely to mean less investment in the private oil industry ում relocation to the Middle East և Russia. However, if the Saudis այլ other Middle Eastern manufacturers adopt the IEA NetZero2050 scenario (which seems questionable) and allow their capabilities to decline, other manufacturers, such as Russia, are likely to keep production. Because, in the end, the demand is not conditioned by the supply. If the Saudis, Exxon or anyone else does not produce oil, consumption will not be affected, unless prices are produced by anyone, and prices will rise. The war on oil supplies is more likely to be as successful as the war on drugs.
So what should the Saudis do? Of course, they have to diversify their economy, it is almost always a victorious economic strategy. But all the economic ups and downs of the past have required capital, and if the United States has received most of it from British creditors (sometimes fraudulently), the Saudis should see oil revenues as a vital resource for their economic program. Oh wait, that’s what they already do.
 Described by Adelman Genie Out of the Bottle, MIT Press, 1995.