[HN Gopher] Saudi Stocks Slump 10% as Minister Warns of 'Painful...
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Saudi Stocks Slump 10% as Minister Warns of 'Painful' Measures
Ahead
Author : samspenc
Score : 38 points
Date : 2020-05-03 21:42 UTC (1 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| bit_logic wrote:
| Many of these oil countries and companies are lacking in vision.
| They could survive and even thrive in a post-fossil fuel world if
| they would invest now and see oil as not just fossil fuel, but a
| means of storage and transport.
|
| The key weakness of renewables (wind and solar) is a mismatch
| between production and use. It's intermittent, you can't control
| when the wind blows or sun shines. The solution many think of is
| giant batteries like those produced by Tesla.
|
| But there are technologies that can take a CO2
| source+water+electricity and create synthetic oil. The Middle
| East is a giant desert, perfect for covering with solar. Texas is
| known to be a great place for wind. Imagine if these economies
| went all in on solar/wind + synthetic oil generation. They
| already have the full oil infrastructure in place to
| process/refine/transport throughout the world. Just switch the
| source from the ground (fossil fuel) to solar/wind+synthetic oil
| generation. If they're smart, they would push hard for carbon tax
| at the same time. Because solar/wind+synthetic oil is carbon
| neutral (take CO2 from the air, burn later during combustion). It
| would put out of business their competitors still stuck on old
| fossil sources.
| rdxm wrote:
| I'm reminded of a classic Sam Kinison piece.....
| https://youtu.be/wAgUICswZuY
| Jerry2 wrote:
| Looks like Saudi regime is in big trouble. They won't be able to
| balance their budget with oil prices so low and they won't be
| able to make payments to thousands of their princes.
|
| I did some searching and found few interesting data points:
|
| > _For dozens of oil producers, the plunge in oil prices is
| devastating. No major oil producer can balance its budget at
| prices below $40; according to the International Monetary Fund,
| with the exception of Qatar, every country in the Middle East
| requires at least $60, with Algeria at $157 and Iran at a
| whopping $390. The average Brent price of oil over the past month
| has been a hair above $20._ [1]
|
| and this from 2019:
|
| > _Top oil exporter Saudi Arabia would need oil priced at $80-$85
| a barrel to balance its budget this year, an International
| Monetary Fund official said._ [2]
|
| Given that WTI is at $19 and Arab Light at $21, there's going to
| be lots of internal changes in ME in the coming years. Probably a
| few wars too.
|
| [1]
| https://www.bloomberg.com/opinion/articles/2020-04-29/covid-...
|
| [2] https://www.reuters.com/article/us-saudi-economy-
| imf/saudi-a...
| emilsedgh wrote:
| I'm an Iranian who moved to the U.S. only a few years ago.
|
| Something most people here in the U.S. don't understand is that
| countries like Iran have a far different threshold of pain.
|
| Iran, as a result of sanctions had already entered starvation-
| levels of economic collapse. There are people who are sleeping
| in open graves. Yet, the regime is not backing down in any way.
| It hasn't change course at all.
| pcurve wrote:
| Here's the break even breakdown
|
| https://data.imf.org/regular.aspx?key=60214246
| Zenst wrote:
| Though Saudi has been aware of its dependancy upon oil and
| beena primary driver in much investment, though when much of
| that investment has been in other companies - then for them it
| is a double hit.
|
| Unsure how advanced along their migration away from oil money
| is over alternatives, but will be further along than other oil
| dependant countries.
|
| Though this will help focus many more minds away from oil, so
| that is not a bad thing at the end of all this.
| Bang2Bay wrote:
| Saudi has been investing heavily in the US stock market. At
| somepoint they were holding TSLA as well, despite relying on oil
| for their living.
| unreal37 wrote:
| Yes the oil industry is going to take years to recover from 2020.
| Zenst wrote:
| Maybe not as it's a supply and demand market, supply outstrips
| demand so more costly extraction shuts down (shale being one of
| them), you then see price rise as less supply and always some
| demand as they always balance out and then, you see other
| sources viable to extract - rinse repeat.
|
| SO to recover to the same level of usage - I kinda hope it
| doesn't and we see a gradual reduction once things back to the
| new normal. But shall see. Problem is as it gets cheaper due to
| surplus - other uses become viable like generating electric as
| cheaper per KW than buying from the grid or other sources.
| Things like that, so the nuances of all this are all down to
| how we define normal after this lockdown. Either way, the
| industry will carry on, just price accordingly.
| TempHNAcc wrote:
| The other comments are talking about oil, but because of
| COVID-19, Hajj and Umrah are not taking place this year.
|
| The Hajj and the Umrah add around $12 billion per year to KSA's
| GDP (7% of the GDP).
|
| The closing of the Haramayn (the Mosques of Makkah and Madina)
| crippled internal tourism which amounts to lots of money.
| Etheryte wrote:
| The image caption used in this article, and in many similar
| pieces, is honestly somewhat scary:
|
| > Why Now Is the Time to Be Buying Big Oil Stocks
|
| This is dangerous advice given most investors, never mind casual
| investors, don't understand how the oil market works. Last I
| checked, there is no convenient way to invest in the spot price
| of oil eventually going up. People who buy "oil ETFs" like USO
| hoping to cash out if the price rises later don't understand how
| the underlying asset works, and end up losing a lot of money [1].
|
| Using captions like that is simply irresponsible and should be
| avoided.
|
| [1] https://www.cnbc.com/2020/04/21/retail-investors-who-
| believe...
| ashtonkem wrote:
| Can the Saudi government survive a reduction in services? Their
| economy is largely built around the distribution of oil sale
| proceeds, I'm worried that cutting benefits might destabilize
| that regime.
| dan-robertson wrote:
| Maybe they can use some of they money they invested in wework
| and such
| 101404 wrote:
| That's what the US troops are there for. The US needs the Saudi
| dictators to maintain their influence in the region.
| ashtonkem wrote:
| Needed, past tense. US foreign policy used to be shaped
| around our need for Saudi oil, and IMO hasn't properly
| adjusted to the fact that America is energy independent
| again. The realpolitik question now isn't "how can I secure
| Saudi oil" But rather "what's the least I can do to reduce
| any risk of terrorism".
| sjg007 wrote:
| Well US troops are there to be a check on Iran, China and
| Russia. Terrorism is a rare side effect.
| toasterlovin wrote:
| FWIW, I would not underestimate the degree to which foreign
| powers that are, otherwise, irrelevant to US interests can
| capture parts of the US political system. It is an
| unfortunate fact that political influence is not all that
| expensive to purchase.
| unreal37 wrote:
| The US "was" energy independent. But now all the US oil
| drillers are shutting down. The same factors hurting Saudi
| are hurting oil in the US.
| ashtonkem wrote:
| While price drops can hurt US oil companies, the US is
| now immune to price spikes, since it can spool up oil
| production quickly.
|
| Maybe Congress needs to bail out oil producers during a
| glut, but that's a lot cheaper than Saudi having to run
| most of their economy on credit.
| RC_ITR wrote:
| Yeah, but now we've proven that we _can_ supply our own
| oil without it being a major drag on the economy.
|
| We may go back to importing one the short term, but
| losing access to Saudi crude is now a 100% solvable
| problem, because all we need to do is ramp up fracking
| again.
| gaukes wrote:
| Ya, and they were diversifying into tourism which is also bust.
|
| I'm sure they'll survive though. Their wealth is in the
| trillions.
| ashtonkem wrote:
| The Saudi budget is a quarter of a trillion dollars.
| "Trillions" doesn't last very long at those levels.
| koolba wrote:
| Saudis aren't exactly known for their adherence to austerity.
| grouseway wrote:
| Venezuela and Syria have survived much worse with fewer
| resources. There will definately be enough money for the police
| and military.
| toomuchtodo wrote:
| Those countries are not surviving. They are failed states.
|
| Edit: So too will be Saudi Arabia; they waited too long to
| take meaningful action to diversify away from oil revenue.
| Norway is the model for how to avoid the resource curse.
|
| https://en.wikipedia.org/wiki/Resource_curse
| mrits wrote:
| I think it's arguable that either of those countries
| survived.
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