History has a little knack for repeating itself.
The only difference is the players.
Nearly 100 years ago, I imagine a small group of oil executives stood atop a sand dune and smiled to themselves.
Why were they so satisfied with themselves standing before a seemingly endless desert?
You can call it hope, exploitation, or even greed.
They called it opportunity.
And they knew it was only a matter of time before this sight became commonplace in the barren region:
Well, it only took until 1932 before SoCal (the precursor to Chevron) struck oil in Bahrain.
A few years and seven drill sites later, one of its subsidiaries — California-Arabian Standard Oil (CASOC) — hit pay dirt with the Dammam No. 7 well.
In 1944, the company changed its name to Arabian American Oil company.
You might know it by another name today: Aramco.
Over the next few decades, the Saudis slowly took back control of their oil resources, step by step. When the once-mighty Ghawar oil field was discovered 1957, the writing was on the wall for Big Oil’s dominance in the country.
The Saudis started taking more interest back in their fields, culminating in the full takeover of the company in 1980. Of course, Aramco was put in charge of managing the country’s oil riches.
Soon, the company was once again renamed, this time to a much more familiar name: Saudi Aramco.
But like I just mentioned, history has a way of repeating itself.
Today, it’s Saudi oil executives that see the opportunity.
In fact, their takeover plan is well underway…
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The United States of Saudi Aramco
Let’s be fair: we saw this coming years ago.
I don’t want to come off with too much doom and gloom here, but I don’t believe people understand the situation that Saudi Arabia is in right now.
The Ghawar field has been pumping oil out of the ground for nearly 60 years!
What can go wrong?
It’s only a matter of time, dear reader. Make no mistake; the low-hanging fruit is gone. And considering how much water Saudi Aramco has to inject into the ground to extract its precious crude there, we might as well change Ghawar’s title to the world’s largest wishing well.
Of course, you know the real fear creeping up on the House of Saud, right?
No oil, no money.
That fear is quickly becoming a reality:
In 2016, OPEC raked in about $433 billion in net export revenue. That sounds like a lot of cash, right?
It’s not.
In fact, revenue last year was at its lowest level in 12 years.
This year is going to be a little better… but it’s not nearly enough.
Do you think it was a coincidence that Saudi Aramco took full control of the largest oil refinery in the United States?
Maybe you missed it when the Saudis made their move.
Don’t worry, you aren’t the only one, especially given the media’s attention squarely fixated on all things Russia right now.
It makes sense, doesn’t it?
After all, betting on steady U.S. oil demand is one of the easiest wagers to make.
One of every five barrels extracted every day from the world’s oil fields is consumed by the United States. Even though that demand is expected to decline slightly over the next four decades, it’s important to truly grasp the staggering amount of crude that is.
The Saudis have realized they’ll never be able to control the U.S. E&P sector, and they’ll never have the power to force our drillers to act how they want.
They can, however, use the U.S. to eliminate any threats from within OPEC.
And they’re going to use us to maintain that edge every step of the way.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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