[vox_mundi]

Saudi Arabia's Post-Oil Plan Starts April 25, Prince Says

Saudi Arabia will announce a comprehensive plan to prepare the kingdom for the post-oil era on April 25, Deputy Crown Prince Mohammed bin Salman said.

The “Vision for the Kingdom of Saudi Arabia” will encompass several developmental, economic, social and other programs, Prince Mohammed said in an interview on Thursday at King Salman’s private farm in Diriyah, the original home of the Al Saud royal family.

One component of the plan is the National Transformation Program, which will be launched a month or 45 days after this month’s announcement, said the prince, who is the king’s son and second-in-line to the throne of the world’s top oil exporter. The plan to transform Saudi Aramco from an oil company into an energy and industrial conglomerate, as well as the future of the Public Investment Fund, will also be part of the comprehensive vision, he said.

Saudi Arabia is seeking to overhaul the economy to reduce the kingdom’s reliance on oil after the plunge in crude prices. Prince Mohammed said in an interview late last month that the plan involves raising non-oil revenue by $100 billion by 2020 as well as turning the PIF into the world’s largest sovereign wealth fund for the kingdom’s most prized assets.

Saudi authorities are weighing measures that include more steps to restructure subsidies, imposing a value-added tax, and a levy on energy and sugary drinks as well as luxury items. The National Transformation Program will also focus on ways to boost economic growth, create jobs, attract investors and hold government offices more accountable.

The prince said last month that Saudi Arabia will sell less than 5 percent of Aramco’s parent in an initial public offering that could happen as early as next year. The company will be transferred to the PIF, which will “technically make investments the source of Saudi government revenue, not oil,” the prince said in the earlier interview.

The fund will then play a major role in the economy, investing at home and abroad. The PIF ultimately plans to increase the proportion of foreign investments to 50 percent of the fund by 2020 from 5 percent now, excluding Aramco.

[dolanbaker]

Looks like they've seen the light and are preserving their (the 0,001%) wealth by making everyone else contribute towards the upkeep of the state (& royalty) rather than relying solely on the oil revenue.

[AdamB]

Sounds like their fear of peak demand is substantial, and real. Seems like time we start applying bell shaped curves to demand, match those to the sine wave cycle of oil production (demonstrated by the US in the near term) and figure out when we will all look back and laugh at our fears of oil supply being our favorite doomer porn scenario.

[Poordogabone]

Sounds like their fear of peak demand is substantial, and real. Seems like time we start applying bell shaped curves to demand, match those to the sine wave cycle of oil production (demonstrated by the US in the near term) and figure out when we will all look back and laugh at our fears of oil supply being our favorite doomer porn scenario.

Peak demand is symptomatic of POD (peak oil dynamics).
PO has caused the mass of people to have diminishing purchasing power and reduced demand for oil. The increasing price of oil since the turn of the century has permitted major investments in oil production but also collapsed the global economy. Today the oil producers are loosing their shirts and are surviving on subsidies. It is no laughing matter and the fear of oil supply is very justified for anyone with the slightest foresight.

[AdamB]

Sounds like their fear of peak demand is substantial, and real. Seems like time we start applying bell shaped curves to demand, match those to the sine wave cycle of oil production (demonstrated by the US in the near term) and figure out when we will all look back and laugh at our fears of oil supply being our favorite doomer porn scenario.

Peak demand is symptomatic of POD (peak oil dynamics).

Not according to real live energy experts, as opposed to us forum types. Generational change appears to be a far more powerful concept than originally thought, and is plowing along without paying any attention at all to the price of oil, or circumstances like the current glut that such dynamics can deliver.

http://eec.ucdavis.edu/highlight/why-th ... peak-soon/

And Amy drives an EV as well.....Ford C-Max Energi I believe. Voting with her hard earned dollars in exactly the right way.

PO has caused the mass of people to have diminishing purchasing power and reduced demand for oil.

Not in the current glut it hasn't. But given a few years, after we come back to a more balanced supply/demand picture, then we'll have a balance...which implies no diminishing here or reduced there...but a balance.

The increasing price of oil since the turn of the century has permitted major investments in oil production but also collapsed the global economy.

I don't know if you've noticed...but the global economy hasn't collapsed. The ChiComs might be in the crapper, but the world doesn't even have a RECESSION going yet, let alone a "collapse". Unless of course you have seriously deflated what "collapse" means, down to like the BDI being low because of an oversupply of ships fighting for the same amount of cargo, a classic supply/demand curve problem rather than anything looking like collapse.

Perhaps you live in Geece? In which case, that isn't collapse either, but just the same thing that happens with those who spend beyond their means and can't keep up with the payments...sort of like the US housing market back in 2008. Or an individual in the US who had their own foreclosed upon, or someone declaring bankruptcy because of having spent too much on their credit cards? Collapse for no one, but a bummer when you can't use the plastic get a coffee at Starbucks.

Today the oil producers are loosing their shirts and are surviving on subsidies. It is no laughing matter and the fear of oil supply is very justified for anyone with the slightest foresight.

The oil production they are selling, even at reduced prices, are not subsidies. And in case you haven't noticed, Rockman is still working at the same place he was before, doing the same kind of things he was before (looking for economically recoverable oil), and while he isn't laughing, he has been through downturns before, just like others. And fear of oil supply is just that...fear. And or those who manufactured it in the past decade, the industry thanks you for making sure that everyone was happy to pay the premium demanded....some ave profited most handsomely from peak oil like fears...so keep thinking it...there are oilmen around the world who will thank you later, should the opportunity come to pass to continue fleecing you, and you thinking it needs to be that way.

[misterno]

Saudi Arabia is a dead toast forever.
No matter how you dice it or roll it or play with it, numbers will not help KSA to get out of this trap.

They need 110 dollars per barrel to balance the budget. If price is lower they spend from pocket which means in 5 years they will bankrupt

Selling Aramco will not help, since their reserves are eroding 15BN/ month and the Aramco offer only covers 10BN of that for ONE MONTH

What are they thinking? It has been almost 2 years since the the collapse of Brent price and yet there is not even one MEASURE TAKEN TO ADDRESS THE PROBLEM.

Not even one.

They can not implement abortion since it is against the Sharia law

They can not implement income tax because expats will not be happy about it.

They can not implement value added tax since the population will not be happy about it

They can not reduce spending because lots of illegal deals and corruption is dependent on it

So here comes bankruptcy

[AdamB]

What are they thinking? It has been almost 2 years since the the collapse of Brent price and yet there is not even one MEASURE TAKEN TO ADDRESS THE PROBLEM.

Not even one.

They have. A very important one. They have chosen not to defend price, but market share. That doesn't speak volumes, it speaks the Encyclopedia Britannica.

It means that the world has changed, they know it, and are preparing for it. And if it involves near term pain for them, the multiple of pain it inflicts on others (particularly the future expectations of the financiers) is worth it.

So yes, they have done at least this one thing. And it signifies that the world...it is now different.

So here comes bankruptcy

Nah.

[misterno]

bankruptcy is inevitable

If you think otherwise, I m waiting for your thoughts

[ROCKMAN]

Before we get deeper into the debate as to whether the KSA eventually files for "bankruptcy" or not perhaps each should define what they mean by "bankruptcy". It means different things to different folks. Which essentially implies that it actually means nothing so arguing about that condition being reached is also meaningless.

So what does a "bankrupt" KSA look like?

[rockdoc123]

So what does a "bankrupt" KSA look like?

1. Saudi business men will now have to buy their Twab's from the high end shops in the Red Sea Mall rather than have them tailored on Saville Row
2. Saudi princes will now have to weave only 10 K gold into their Bisht's rather than 24 K gold.
3. Saudi women will now have to have their Hijab's tailored by the lesser known designers in Europe
4. Cheaper booze will now be secretly trucked to the various palaces in the Kingdom ....no more $2000 bottles of Krug, $500 bottles of Moet will have to suffice
5. Saudi princes will now be limited to 3 super cars each
6. Saudi youth will have to live with solid gold rolexes rather than diamond encrusted ones
7. Saudi's will have to switch back to high end Range Rovers from their current G series Mercedes as vehicles for their servants to drive around Riyadh on errands.
8. Saudi business men will have to decrease the number of mobile phones they carry with them to 2 from 4
9. The super computer at KSA headquarters will now be limited to 12 hours a day of operation rather than 24.
10. Saudi management at KSA will now be required to show up for at least 3 hours per week and will be chastised for falling asleep in meetings.

Looks pretty horrible

[tita]

They have tried several times to diversify their economy, without much success. Most of the jobs created were taken by foreign people. They basically don't work, because they don't have to. They don't have any VAT tax, neither fiscal system. The governement revenue is oil-based.

So, talking about bankruptcy is nonsense. Like rockdoc said, lowering a bit of their living standards is enough. And they don't plan to lose revenue from oil for some time.

[misterno]

Before we get deeper into the debate as to whether the KSA eventually files for "bankruptcy" or not perhaps each should define what they mean by "bankruptcy". It means different things to different folks. Which essentially implies that it actually means nothing so arguing about that condition being reached is also meaningless.

So what does a "bankrupt" KSA look like?

bankruptcy means defaulting on debt

[misterno]

what you are talking about is the effect on the 1st year of oil decline which was on 2015

fast forward 2020, bankruptcy is inevitable. Reserves are declining 15BN/month and there is no sight of reforms yet.

Just look at the forward rate of Saudi Riyal and you will understand how devastating it is.

http://www.bloomberg.com/news/articles/ ... acts-imply

If I were an expat in KSA, I would expect new income tax to citizens and non citizens, and higher rents in their houses as well as more expensive everything and also value added tax.

This supposed to be done 10 years ago, they are sooooo behind

But even these reforms are done, it is impossible to stop the 15BN/month budget deficit.