Saudi Arabia has been a sort of model country for much internal progress since the oil embargo of 1973 catapulted the members of the organization of petroleum exporting countries (OPEC) into immeasurable profitability. Not the least of “progress” aspects derived from oil money has been the elevated living standard of the nation’s people. For a bit of a history lesson on this, I revert to the bid by OPEC in the mid 70’s.
The 1970’s Happened
Be the end of the oil embargo imposed by OPEC, the price of oil had risen from $3 per barrel to nearly $12 globally. In the US we felt the sting even more significantly as I recall. The crisis literally shocked America, and later the 1979 “second oil shock” was to do even more catastrophic damage. This was in the aftermath of several key events, but the Nixon administration’s discovery America could no longer keep up production of oil was the most significant. The story is a deep one, but Saudi Arabia coming out on top as a world energy power was the end result. It was at about this time Saudi production went into overdrive, and Saudi leaders soon became billionaires. Here’s where my story gets interesting.
Americans will remember an economic theory of the US President Ronald Reagan at about this time. The so-called “Trickle Down Theory” was the catch phrase that captivated the masses then. Part joke, part real economics, the idea of the fabulously wealthy getting richer, and their win filtering down to poor people – well, it caught on big time. Reagan was one of the most popular presidents ever, and for a time his economics worked. Trickle Down worked in Saudi Arabia too, in fact all the oil-exporting nations accumulated vast wealth. That is until the bubble busted recently. I’ll address the Saudi social empowerment in a moment, but the effects of OPEC on the Cold War bear scrutiny here as well. The United States’ hegemony prior to the oil crisis was solely focused on the Soviet Union and China, but with OPEC’s bid at emergence, Washington faced a new “third world” threat. Drastic measures were undertaken as a result, measures we see the effects of now in Syria, Ukraine, with regard to Russia and Iran, and worldwide. For one thing, NATO and the rest of the leagues of nations were forced to be far more “pro-Arab” than ever before. While this was a very good thing in many respects, nations of these coalitions refocused strategies accordingly. The Saudis and others became increasingly dependent on defense by the United States, which in turn led us to the veritable vassal state situation in Europe.
Sputtering Oil Fields
Returning to my original argument, Saudi Arabia is now going broke via an American bid to reshuffle the economic and policy deck. America’s last shale reserves are being pumped dry in an effort to break Russia and other nations dependent on exporting energy resources for their economies. And while Russia could probably overcome any hardship out of sheer necessity, Saudi Arabia has nothing but oil to rely on. Saudi royalty has for decades built a civil system relying on lavish schemes and placating the masses, paid for by an unsustainable commodity. While the western press touts Wahhabi desires to eliminate vestiges of Shia religiosity within Saudi’s sphere of influence as a causal point in Saudi aggressiveness of late, going broke would seem the greater fear to me. Assuming my theory has merit, let’s turn to Saudi oil reserves, and to recent austerity moves by the leadership. New VAT and other taxes are in the wind, funding for external projects has slumped, and business in Riyadh has screeched to a halt in some sectors. New projects like the lavish architectural creations looming in the deserts have halted, the Saudis are not happy people like they were. Even the filthy rich there have their own forms of austerity, which involve emptying their swimming pools, swapping gas-guzzling SUVs for more economical transport, and even turning off the AC. Last month the Wall Street Journal reported that dashed oil prices have already wiped out the Saudi budgetary plan. RT reports of debt defaults already looming large, so one can only imagine what will happen if the oil truly runs out. By way of an illustration the Ghawar Field, largest in the world, is running out after about 65 years of continuous production. Reports the Saudi Aramco will be starting the CO2-EOR process to extract the last of the field’s oil, they tell us this field will be depleted totally soon. Once this happens, Saudi Arabia will return to an almost medieval third world status. Either this or those billions horded by Saudi princes will have to be used to placate or to subdue the people.
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This August, 2015 The Telegraph piece by author Ambrose Evans-Pritchard notwithstanding, Saudi Arabia going broke due to low oil prices may not be the issue really. To the point, a recent Citigroup study suggested that Saudi Arabia may actually run out of óil by the year 2030. Furthermore, a recent WikiLeaks revelation cited a warning from a senior Saudi government oil executive telling that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels, or by nearly 40%! With the world having reached a threshold known as “peak oil” already, we can easily ascertain “why” the Saudis, the US hegemony, and other players seem desperate for war nowadays. For those unaware of what I am talking about, let me frame what “peak oil” really means.
Peak oil refers to an event based on M. King Hubbert‘s theory, where the maximum rate of extraction of oil is reached. After this date, oil capacity will fall into irreversible decline. Hubbert was one of those genius types who was a significant geoscientist noted for his important contributions to geology, geophysics, and petroleum geology. He worked with Shell Oil at their labs back in Houston, and is quoted as saying about our overall dependency:
“We are in a crisis in the evolution of human society. It’s unique to both human and geologic history. It has never happened before and it can’t possibly happen again. You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered.”
Hubbert’s “peak oil” prognosis was actually supposed to take hold back in 1995, and it is my sincere belief that it did. His science is essentially irrefutable. If you run down his theory of “peak oil” you’ll inextricably come to a graphic of a bell curve of world oil production. For my part, I have taken Hubbert’s math and overlaid other “depletive” curves for production and resource allocation simply to satisfy my own scientific curiosity. I studied environmental geography under one of the world’s most renowned former Shell geologist, Dr. Mitch Colgan. That said, the graph you see from Hubbert’s 1956 report to the American Petroleum Institute, on behalf of Shell Oil, shows Ohio oil production, which mirrors Texas, or any other region where such a resource is depleted. The “fact” the world will run out of oil is incontestable, like I said. And the Saudis have been pumping massive quantities of oil longer, and faster than anyone.
There’s not space here for an exhaustive study of whether or not we’ve achieved the “peak oil” threshold. I would like to leave off on M. King Hubbert here with an ironic note, a case I discovered concerning his association in World War II with the US Board of Economic Warfare. Hubbert was evidently a candidate for helping this Washington D. C. agency, but was somehow deemed “ineligible” or undesirable, which in turn caused some controversy. You will no doubt find the letter from the chairman of the economic warriors interesting. I’ll wager most people never even knew America has such departments. But I need to sum up.
Now What, More War?
Where Americans’ interests are concerned, while President Obama has been parlaying trendy terms like “renewable energy” and his supposed climate change agenda, the fact is petroleum still powers 96% of all transportation in America. Furthermore, fossil fuels 44% of the industrial sector, and coal provides 51% of the nation’s electricity still. Nuclear provides this biggest chunk of electricity after coal, just to be clear here. Denial that peak oil has been reached is not only idiotic, it may end up being catastrophic. The Saudi leadership is drawing back with austerity measure against the people. Saudi militarism is on a gigantic upswing, as we see in Yemen and with the Turkey innuendo. Evidence Obama and other western leaders know of the “peak oil” crisis abounds. A recent Department of Energy request to expert Robert Hirsch in 2005 revealed a damning truth. I quote from the report, which mysteriously disappeared in PDF and other forms from the web:
“The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.”
Within the various reports by Hirsch (PDF) and other, we find statements like the one from Dr. Sadad al-Husseini, a retired senior Saudi Aramco oil exploration executive, who went on record saying, “that the world is heading for an oil shortage.” The world consumes 85 billion barrels of oil each day. That’s about 40,000 gallons per hour, and demand is not slowing, but increasing exponentially. Geologists have already determined that more than 95% of all the recoverable oil has already been found.
Saudi aggression in Yemen, the recent siding with Turkey, and the withdrawal of aid earmarked for military purchases by Lebanon are all clear signs of a nation in big trouble. If my theory is correct and if these Saudi oil fields are running out, then rumors of a re-Islamification of Turkey make the Saudi alliance meaningful. Oil fields in Syria and Northern Iraq may in fact be a vision of continued Saudi wealth gathering. So the deepening of strategic ties in between Turkey and Saudi Arabia, and against the Russian and Iranian interests in Syria, may reveal another unseen plan. Or at least the only feasible way any nation totally dependent on oil exports might survive in tact. Washington likes to make religion the source of all conflict, or Vladimir Putin one, but the reality is, Saudi Arabia is “probably” running out of gas.
Like I said, it’s all food for thought.
Phil Butler, is a policy investigator and analyst, a political scientist and expert on Eastern Europe, exclusively for the online magazine “New Eastern Outlook”.
