I’ll keep this brief.
A new report from an independent think tank Chatham House in the UK is out with some shocking forecasts… most important of which is that Saudi Arabian oil exports will decline to zero by 2038.
The title of the report sums up its thesis: Burning Oil to Keep Cool: The Hidden Energy Crisis in Saudi Arabia.
Let me be clear: This is about Peak Oil.
The idea isn’t that Saudi oil production will fall off a cliff. Instead, Saudi Arabia’s growing population and growing energy demand — combined with their reliance on burning oil for electricity — will consume a larger and larger portion of the oil it produces.
If production stays steady and policies aren’t adopted to curb domestic consumption, here’s what the Saudi oil picture looks like:
The report makes no bones about it:
Saudi Arabia’s energy consumption pattern is unsustainable. The country currently consumes over one-quarter of its total oil production — some 2.8 million barrels a day.
This means that on a ‘business as usual’ trajectory it would become a net oil importer in 2038.
Think of the implication of twenty percent of global net oil exports — gone.
I can think of two inevitable outcomes…
First, the Saudis are going to have to invest heavily in other methods of producing electricity.
The $109 billion plan to generate a third (33%) of its supply from solar announced last month is just an appetizer.
Second, other sources of oil will become all the more valuable.
Folks, scenarios like this are why we founded Energy & Capital nearly seven years ago: to bring you practical investment analysis in the new energy economy.
Right now we think it’s practical to invest in North American oil production as the Saudis face their new energy economy reality.
The rest of this week’s analysis is below.
Call it like you see it,
Nick Hodge
Editor, Energy and Capital
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Don’t Sell Gold: Investors are Forgetting One Thing
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