INTRO: Not too long ago, Saudi Arabia was a desolate
wasteland filled with tribes who were fighting for survival.
The area had extremely low economic activity, and aside from Mecca, they had nothing going
for them.
On March 3, 1938, however, all of this would change when the Americans found the world’s
largest petroleum reserves.
Over the next few decades, much of the profits from the area went to the Americans while
Saudi Arabia was left with measly dividends.
But, Saudi Arabia slowly saved up these dividends and started buying up these oil companies
that were drilling across their country.
And eventually, by 1980, the Saudi government would grow their stake to a 100% which made
them the owners of the most profitable company in the world: Saudi Aramco.
Saudi Aramco has since revolutionized the area into a modern desert oasis.
But, while their cities are more modern than even western cities, they still have one fatal
bottleneck: 92% of their budget comes from oil.
Now, most of us have been led to believe that Saudi Arabia has enough oil to run for several
decades if not over a century.
But, many experts disagree, because there is evidence that Saudi Arabia may have been
lying about their oil reserves.
So, how much longer till Saudi Arabia really runs out of oil?
SKETCHY DATA: To figure out how much time Saudi Arabia has
left, we can approach the problem in two different ways which are the supply approach and the
demand approach.
For this video, we’re mainly gonna focus on the supply.
Saudi Arabia is estimated to have 260 billion barrels of oil left.
And over the past 10 years, Saudi Arabia has on average pumped out roughly 10 million barrels
of oil per day.
This means that over an entire year, Saudi Arabia pumps out approximately 3.65 billion
barrels of oil.
Doing some simple math, we’d find out that if Saudi Arabia maintains their current output,
they’d run out of oil in 71.2 years or sometime in the mid 2090s.
This might sound like a long time away, but the thing to keep in mind is that it’s already
been 84 years since Saudi Arabia started pulling in oil revenue.
This means that Saudi Arabia is over half way through their oil roller coaster.
But, things may be a lot worse than this.
You see, a lot of experts think that Saudi Arabia has been lying about their oil reserves.
All of the oil reserve estimates that we’ve gotten for decades now is from Saudi Arabia
themselves and the data is rather sketchy.
First of all, in 1989, Saudi Arabia’s oil reserves just randomly skyrocketed from 170
billion to 260 billion.
But, all of Saudi’s biggest oil fields were discovered between 1936 and 1970.
And no comparable discoveries have been made in the last 50 years, so how did their reserves
apparently jump by 90 billion barrels overnight.
Something else to note is that the timing of this jump was also super sketchy.
While Saudi Arabia took control of Aramco in 1980, it wasn’t until 1988 that the Americans
were fully pushed out and Saudi leadership was established.
And somehow, just one year after this change in leadership, their oil reserves skyrocketed
by 50%.
Now, that’s definitely quite suspicious.
Also, Saudi Arabia has been claiming that their oil reserves haven’t changed in 33
years.
This doesn’t seem all that likely given how much oil they’ve pumped out in the past
33 years.
Going back to the Saudi oil output graph, we can see that Saudi Arabia has averaged
about 8.5 million barrels of oil over past 3 decades.
This works out to a total output of 102 billion barrels of oil.
Also, if we look more closely at the Saudi’s reserve data, we’ll see that they have not
only been claiming that their oil reserves have stayed constant, but they’ve actually
been claiming that it’s been increasing.
In 1990, there were 258 billion barrels of oil but as of 2016, there were 266 billion
barrels of oil.
This means that Saudi Arabia was not only able to pump out 102 billion barrels over
the last 30 years, but they were able to come out on top by 8 billion barrels.
In other words, Saudi Arabia has been able to find a 110 billion barrels since the Americans
left.
And that’s in addition to the initial 90 billion barrel jump.
So, apparently, Saudi Arabia has found a total of 200 billion barrels of oil since they took
over.
Keep in mind, this figure is 30 billion barrels more than what the Americans estimated Saudi
Arabia had in total in the 1980s.
Now, I know a lot of people aren’t exactly fans of Americans.
But, one thing I think we can all agree about is that Americans are phenomenal at capitalistic
exploitation.
So, the idea that the Americas exploited Saudi Arabia for 50 years and didn’t even find
half of their oil reserves (AKA 200 billion barrels) seems pretty far fetched to me, but
I’ll let you be the judge of that.
WHY LIE: It’s not just the data that’s pointing
to inconsistencies either.
There have been some major leaks over the years that have pointed towards the Saudis
lying.
In 2011 for example, we saw a leak from WikiLeaks that claimed to cover insider info from a
high level Saudi oil executive.
According to the executive, over the years, Saudi Arabia had been overstating their oil
reserves by as much as 300 billion barrels.
Also, something else to note is that Saudi Arabia has never been able to pump up production
that much.
If they truly found another 200 billion, you would think they would have plenty of new
oil fields to drill from and increase production.
Yet, they have been unable to top what the Americans got them to.
You see, 10 million barrels per day is nothing new.
In fact, the Americans were able to reach this level with Saudi Arabia way back in 1980
when they reached 9.9 million barrels per day.
It’s been 42 years since then, but the Saudi’s have barely been able to reach 10.7 million
barrels per day.
Also, it doesn’t seem like the Saudis are holding back either.
For example, even with Donald Trump threatened to withdraw military support, Saudi Arabia
couldn’t increase production to over 10.5 million barrels per day.
Now, you could say that Saudi Arabia refused to respond to threats, but they weren’t
able to increase production even when they were the ones that were issuing the threat.
For example, remember when oil prices crashed between 2014 and 2016.
Oil prices crashed from $120 to just $42 and one of the main reasons for this was Saudi
Arabia.
You see, the US was making strides when it came to extracting oil from oil shales.
This meant that the US would become less dependent on the middle east for oil.
So, Saudi Arabia and OPEC decided to launch a price war against shale oil extracters.
The idea was to pump up oil production and crash oil prices to run these extracters out
of business.
This would’ve been the perfect time for Saudi Arabia to pump up production to 15 or
even 20 million barrels per day, but they weren’t even able to cross 11 million barrels.
Clearly, Saudi Arabia can’t even surpass the ceiling that the Americans got them to
which just makes it even more likely that they’ve been lying about reserves.
But, all of this brings up the question, why lie?
Wouldn’t it be better for Saudi Arabia if everyone knew that oil reserves weren’t
as plentiful.
Less supply equals higher prices which means more profit for Saudi Arabia right?
Well, this would be true at the beginning, but it wouldn’t last long.
You see, even with Saudi Arabia’s likely inflated figures, they don’t actually hold
the world’s largest oil reserve.
This title actually goes to Venezuela who holds 300 billion barrels.
Now, Venezuela oil has never been that helpful to the world because the country has been
plagued with corruption, hyperinflation, and who knows what else.
But, the second the world knows for sure that Saudi Arabia doesn’t have as much as they
said, they’re gonna turn their entire focus onto the remaining countries.
We’ll see historic strides in Venezuela and Canada.
Heck, we might even see the western world make amends with Russia.
At the same time, the push for renewable energy will also become stronger than ever before,
and all of this will reduce the world’s dependency on Saudi Arabia.
And given that oil is the only thing that gives Saudi Arabia any sort of significance
on the world economic stage, this would not be in Saudi Arabia’s best interest.
For them, it’s best to keep the rest of the world as dependent as possible on their
oil.
And if that means lying about their oil reserves, then so be it.
THE COUNTDOWN: But, if Saudi Arabia has been lying about
their reserves this entire time, how much time do we actually have until they run out?
Well, if we assume that the last accurate piece of data we have is from 1988 when the
Americans left, this means that Saudi Arabia was left with a 170 billion barrels of oil.
Realistically, it’s possible that they’ve increased this amount by 10-20% over the past
34 years, so we’ll give them the benefit of the doubt and call it 200 billion barrels.
At 8.5 million barrels per day on average, Saudi Arabia would have used up 105 billion
barrels since 1988.
This would levae them with 95 billion barrels left today.
If Saudi Arabia continues to average 8 to 10 million barrels per day, this would mean
that they only have roughly 25 to 30 years left.
If Saudi Arabia has been lying, then I think this is likely a pretty realistic estimate.
Now, we could of course go full tin foil hat mode and become doomsday theoriziers.
What if Saudi Arabia found no new oil after the Americans left and what if 20% of the
remaining 170 billion was unusable?
This would mean that Saudi Arabia only had 136 billion barrels of usable oil in 1988.
Given that we’ve used approximately 105 billion over the past 34 years, this would
leave them with just 31 billion barrels today.
And at this rate, they’d be out in just 10 years.
While that sounds scary, it’s more than likely not true.
While Saudi Arabia may be lying about having 70 to 100 years worth of oil left, it’s
likely that they atleast have a few decades left.
And this matches up with the kingdom’s actions as well.
If they truly had several decades worth of oil left, I don’t think they’d be going
all in on growing other sources of revenue.
Over the past couple of years, Saudi Arabia has made insane strides when it comes to adopting
western standards.
Women’s rights and human rights have gotten significantly better, and they’ve even opened
up the country to tourism for the first time.
They’ve also been pouring billions of dollars into airports and tourist attractions, so
it’s seems like they’re pretty determined to turn the country into a tourist hub just
like Dubai.
There’s also the whole Vision 2030 project led by Mohammed Bin Salman which aims to significantly
reduce the country’s dependence on oil.
If such projects go well, I think it’s pretty realistic for Saudi Arabia to become independent
from oil by the time they run dry.
So, while they may be tricking the entire world regarding their reserves, they’re
not tricking themselves, and they’re getting prepared for a future without oil.
THE FUTURE OF SAUDI ARABIA: While we can argue that lying about their
reserves is unethical and manipulative, from an objective perspective, they’ve actually
played their cards really well.
By overstating their reserves, they’ve been able to maintain their dominance wihtin oil
industry.
Their crude oil exports are literally twice as high as second place.
This has allowed them build up a war chest that’s worth nearly half a trillion dollars.
They also took Saudi Aramco public a few years ago at a $2 trillion valuation, so it looks
like they’re slowly wanting to cash out over there as well.
In the meantime, they’ve also started to aggressively diversify their income streams,
so it looks like Saudi Arabia is poised do extremely well even after the run out of oil.
As for the rest of us, we may not have as much oil left as we originally thought, but
maybe that’s a good thing.
Maybe this is exactly we need to finally make the jump to renewable forms of energy and
leave our gas guzzling days in the past, but that’s just what I think.
Do you think Saudi Arabia’s oil reserves are sketch?
Comment that down below.
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