Saudi Arabia oil minister sacked in major cabinet reshuffle

[gandalf12]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

I remember it well. Oil hit $8 / barrel and there was still a lot of jobs around. Makes you wonder why at over $40 the companies are saying it is too low.

Because they are now spending more than they are bringing in. The good times are gone.

Obviously you have no idea about the Oil & Gas industry

[Naam]

I remember it well. Oil hit $8 / barrel and there was still a lot of jobs around. Makes you wonder why at over $40 the companies are saying it is too low.

When was that then ?....the last time oil was sub 8 a barrel was period 1946 to around 1974

1986 it hit $8 for a short period

And thats why i am confused it bottomed at $ 9.75/barrel in 1986

"it" did and does not exist. OPEC members and others sold in summer 86 a variety of different quality crude for even less than $8/barrel.

[gandalf12]

July August. I was working in Qatar Petroleum, where were you working in the industry?

[craigt3365]

Because they are now spending more than they are bringing in. The good times are gone.

Obviously you have no idea about the Oil & Gas industry

This isn't about the oil and gas industry. This is about finances. Of which I know quite a bit about. Having a masters in corporate finance, and being a consultant for issues like this in the past with PriceWaterhouseCoopers.

http://www.bloomberg.com/view/articles/2016-01-07/saudi-arabia-has-bigger-problems-than-iran

Facing this budget crunch, the young prince did what you might expect from a modern monarch: He called in the consultants. With advice from McKinsey & Co., Mohammed bin Salman has outlined a plan that will impose taxes and cut billions in electricity, gasoline and water subsidies, particularly among the wealthiest. The government has begun issuing sovereign bonds, its first since 2007, rather than further draw down its $635 billion in reserves. Some state-controlled functions, such as airports, will be privatized.

Above all, the plan calls for diversifying the economy away from oil, which provides 80 percent of budget revenue. The imported number crunchers say a "productivity- and investment-led transformation" could add 6 million jobs by 2030. Sure. Mohammed bin Salman wasn't alive to see all of them, but there have been at least 10 previous official development plans for the kingdom since 1970, and each has put economic diversification at the top of the agenda.

[gandalf12]

Because they are now spending more than they are bringing in. The good times are gone.

Obviously you have no idea about the Oil & Gas industry

This isn't about the oil and gas industry. This is about finances. Of which I know quite a bit about. Having a masters in corporate finance, and being a consultant for issues like this in the past with PriceWaterhouseCoopers.

http://www.bloomberg.com/view/articles/2016-01-07/saudi-arabia-has-bigger-problems-than-iran

Facing this budget crunch, the young prince did what you might expect from a modern monarch: He called in the consultants. With advice from McKinsey & Co., Mohammed bin Salman has outlined a plan that will impose taxes and cut billions in electricity, gasoline and water subsidies, particularly among the wealthiest. The government has begun issuing sovereign bonds, its first since 2007, rather than further draw down its $635 billion in reserves. Some state-controlled functions, such as airports, will be privatized.

Above all, the plan calls for diversifying the economy away from oil, which provides 80 percent of budget revenue. The imported number crunchers say a "productivity- and investment-led transformation" could add 6 million jobs by 2030. Sure. Mohammed bin Salman wasn't alive to see all of them, but there have been at least 10 previous official development plans for the kingdom since 1970, and each has put economic diversification at the top of the agenda.

I can see your confusion, you are working off the US markets. There is more than one market in the world and the US does not dictate them.

[Naam]

Saudi Arabia's good times are not over Craig if they adopt besides Mc Donalds, Burger King, Kentucky Fried Chicken et al more of the "American way of life" such as issuing debt over and over again till debt issues are required not only to cover redemptions but also interest payments.

this method might even have a positive result, namely sending home 8 million legal and 2-3 million illegal workers from third world countries forcing future generations of Saudis to work for a living.

[Chicog]

The Saudis are in deep pooh. They virtually import all their labour and everything else they need in their lives and haven't any idea how to do anything themselves except spend the money they get from oil. When the day comes that they can no longer afford to import labour then they are going to have to learn to do things for themselves like undo a nut with a spanner or tighten a screw or wash their gold plated car. I suspect there is little they can do about the price of crude except suck it up and live within their means. Is there anything other resource they have to make them less dependent on oil?

They have a much bigger problem.

Most of their domestic energy consumption goes to desalinate water.

When it dries up there will be an awful lot of refugees heading out.

Edited May 8, 2016 by Chicog

[Steely Dan]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

A war with Iran would perk the price up no end, though obviously outside his remit.

Yes, the awesome Saudi armed forces have Iran trembling, I'm sure.

Just because others have been stupid enough to fight their wars for them doesn't mean they can't fight. Trying to keep this on topic I believe the Saudis are investing billions of dollars in an attempt to transition away from oil.

that's their plan since many years but without any result because the planning was not followed by actions. with a very young chap now in charge the situation might be different. but even 30 year old Mohamed bin-Salman will push retiring age before the problems are solved.

Indeed bin-Salman has a massive task to undertake, I suspect the will is there, though we will likely not live long enough to eat Falafel in Mecca.

[gandalf12]

Saudi Arabia's good times are not over Craig if they adopt besides Mc Donalds, Burger King, Kentucky Fried Chicken et al more of the "American way of life" such as issuing debt over and over again till debt issues are required not only to cover redemptions but also interest payments.

this method might even have a positive result, namely sending home 8 million legal and 2-3 million illegal workers from third world countries forcing future generations of Saudis to work for a living.

Saudi's work for a living? Come on you are joking. You know and I know as we have been there that is never going to happen. Interesting concept though

[Naam]

Indeed bin-Salman has a massive task to undertake, I suspect the will is there, though we will likely not live long enough to eat Falafel in Mecca.

[impulse]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

The fact is, its the Saudis who have forced the oil price down by not cutting production, so in effect its their own doing and now gamble they took has back fired...time to pay the piper

Last time, it was an agreement between the house of Saud and the house of Bush (as a proxy of Reagan, who was already senile by his second term), to bankrupt the Soviets. I'm betting this price collapse is the same, this time with Putin in the crosshairs.

They may bankrupt their treasury, but I suspect there are some pretty deep and secret assurances that the power of the ruling dynasty will be protected in return.

Full disclosure: This is wild-ass speculation on my part. Tossing out a little troll bait... Let's see if I get any bites.

Edited May 8, 2016 by impulse

[Naam]

Saudi Arabia's good times are not over Craig if they adopt besides Mc Donalds, Burger King, Kentucky Fried Chicken et al more of the "American way of life" such as issuing debt over and over again till debt issues are required not only to cover redemptions but also interest payments.

this method might even have a positive result, namely sending home 8 million legal and 2-3 million illegal workers from third world countries forcing future generations of Saudis to work for a living.

Saudi's work for a living? Come on you are joking. You know and I know as we have been there that is never going to happen. Interesting concept though

believe it or not! Rosewood Hotel Jeddah two years ago. crew of aircon mechanics, two very polite young Saudis speaking proper English, settled our complaint of a misfunctioning thermostat (room temperature freezing). in the Al Khobar/Damman area i met Saudis working behind the reception years ago.

[Chicog]

I don't know why people assume all Saudis are rich and lazy.

There is a lot of poverty in Saudi Arabia - if you are Shi'a you are lucky if you can get work at all.

[craigt3365]

I can see your confusion, you are working off the US markets. There is more than one market in the world and the US does not dictate them.

That graph isn't for US markets, it's from the IMF if you look closely. Where did I say the US was dictating this market? Though the trading medium is USD, right?

[Koosdedooes]

The Saudis are in deep pooh. They virtually import all their labour and everything else they need in their lives and haven't any idea how to do anything themselves except spend the money they get from oil. When the day comes that they can no longer afford to import labour then they are going to have to learn to do things for themselves like undo a nut with a spanner or tighten a screw or wash their gold plated car. I suspect there is little they can do about the price of crude except suck it up and live within their means. Is there anything other resource they have to make them less dependent on oil?

They have a much bigger problem.

Most of their domestic energy consumption goes to desalinate water.

When it dries up there will be an awful lot of refugees heading out.

I have it on very good authority the Saudi's and a few others in the sandbox over there are looking at commerical nuclear plants

Go and google "ENEC"....this is a cog in a "bigger regional machine"

[Ulic]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

I remember it well. Oil hit $8 / barrel and there was still a lot of jobs around. Makes you wonder why at over $40 the companies are saying it is too low.

Probably because 8-10 dollars then has the value of 40-50 dollars now.

[swerver]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

A war with Iran would perk the price up no end, though obviously outside his remit.

Yes, the awesome Saudi armed forces have Iran trembling, I'm sure.

Just because others have been stupid enough to fight their wars for them doesn't mean they can't fight. Trying to keep this on topic I believe the Saudis are investing billions of dollars in an attempt to transition away from oil.

Correct they're investing billions on killing equipment they buy from the west. They already have thousands of tanks, armored cars, you name it, because as an infantry footsloggers Saudis are worthless, they will only front an enemy when sitting in an armored vehicle. This is not hear say, this is having spend 15-years in their world. They have multi hundreds of jet fighters but less than a hundred jet jockeys which they compensate by contracting with the USAF and the RAF to fly their RSAF jet fighters which after all are US and UK manufactured jet fighters. Same goes for RSAF transport planes.

[Steely Dan]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

A war with Iran would perk the price up no end, though obviously outside his remit.

Yes, the awesome Saudi armed forces have Iran trembling, I'm sure.

Just because others have been stupid enough to fight their wars for them doesn't mean they can't fight. Trying to keep this on topic I believe the Saudis are investing billions of dollars in an attempt to transition away from oil.

They did announce a 2 trillion dollar program to transition away from dependence on oil. In 4 years, I believe. It was almost universally greeted with derision. It also proposed to turn Saudi Arabia into an economically developed nation. But, the education system is so poor that most Saudis graduate with very little useful knowledge Unless you count an intimate and prolonged pedagogic acquaintance with the Saudis deranged version of Islam useful. And most of those who do get away to study abroad and learn what its like to live in a reasonably free society, don't return.

Here's a long rambling link from someone who is very optimistic about changes in Saudi Arabia (has self confessed mental issues so take it as you will).

http://www.thomaswictor.com/opsec-keeps-soldiers-alive/

The military stuff is interesting as if proven right it may support the more difficult thesis of updating the Saudis to the current century, though I'm with Naam on the time scale if such things are possible at all.

[smotherb]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

I remember it well. Oil hit $8 / barrel and there was still a lot of jobs around. Makes you wonder why at over $40 the companies are saying it is too low.

Gee, its the business trifecta--1) the companies realize they don't need so many on the payroll, 2) they realize the salaries of those needed don't need to be so high, and 3) they realize how many people need work

[smotherb]

a déjà vu of 1986 when Ahmed Zaki Yamani, who served 24 years as "oil minister", was sacked letting crude fall below $10/barrel.

I remember it well. Oil hit $8 / barrel and there was still a lot of jobs around. Makes you wonder why at over $40 the companies are saying it is too low.

Probably because 8-10 dollars then has the value of 40-50 dollars now.

Not hardly, more like $10 1986 is worth $22 now. http://www.davemanuel.com/inflation-calculator.php