Friday, October 9, 2015

Economy: Oil - What Saudi Arabia Really Fears

(Drivebycuriosity) - There is a "Opec price war", writes MarketWatch (marketwatch). Bloomberg and other media report, that Saudi Arabia is pumping more oil even that the commodity is significantly cheaper than last year. The media claim that the Saudis want to hold the oil price down to make US shale oil production unprofitable in order to squeeze the American competitors out of the market.

Maybe so. But I believe Saudi Arabia - and the whole OPEC - have more to fear than just American shale oil. I think they have to be afraid of Tesla and the like. Saudi Arabia´s oil reserves are supposed to last for decades. The Saudis don´t want to sell oil just today or next year, they want to sell it in 10 years, in 20 years and later. So they might think about how the demand for oil - and its prices - could develop in the coming years.

The long term calculation of the Saudi`s might include Tesla and other producers of electric cars. Tesla plans to introduce a more affordable model in 2017 (price about $35,000 huffingtonpost) . Apple is supposed to produce electric cars beginning in 2019 and other automakers are working on electric cars as well. It is likely that electric cars will become common in the years 2020 and later.

The power for electric cars will come will from plants which use natural gas, which is abundant in the US, and alternative energies like solar and wind craft. The cost for these technologies are falling too, making them more competitive.

The rise of electrics car will put a dent into the demand for gasoline. It is likely that after the year 2020 the world might consume less gasoline than today. Alternative energies and transportation systems could reduce the demand for oil in the coming decades and squeeze the price or the commodity down. If the the price of oil falls below its long term average - about $30 (oilandgasinvestor) - the Saudis could be happy to sell their oil for today´s prices around $50.

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