Two Charts Why The Middle East’s Largest Oil Producer Is In Serious Trouble

The Middle East’s largest oil producer is in serious trouble as it continues to burn through cash.  Not only is Saudi Arabia burning through its foreign exchange reserves at a rapid pace, its future net oil exports will continue to decline.  Why?  Because Saudi Arabia is using more of its own oil.. and that is a BIG PROBLEM.

Matter a fact, Saudi Arabia’s net oil exports were higher in 1980 than they there were in 2015.  According to the 2016 BP Statistical Review, Saudi Arabia produced a total of 10.2 million barrels a day (mbd) of petroleum liquids, while its domestic consumption was only 592,000 barrels per day (bd).  Thus, Saudi’s net oil exports were 9.7 mbd in 1980:

Even though Saudi Arabia’s total petroleum liquid production increased to 12 mbd in 2015, their domestic oil consumption jumped to 3.9 mbd.  Which means, the Saudi’s net oil exports are only 8.1 mbd, lower than what they were in 1980.

This is a very important factor not discussed by the energy analysts.   While it is true that the Middle East is producing more oil than ever, they are also consuming a great deal more oil for their domestic economies.  For example, total Middle East net exports were 20.8 mbd in 1976, however they fell to 20.4 mbd in 2015.

The increase in Saudi Arabia’s domestic oil consumption will continue to put a squeeze on its oil exports in the future.  In just ten years, Saudi Arabia’s domestic oil consumption has grown by 1.7 million barrels per day.  Once, the Kingdom’s oil production really starts to decline, their net exports will fall considerably.  This will make their financial situation go from BAD to WORSE.

As I mentioned in my article, Low Oil Prices Continue To Decimate Saudi Arabia’s Currency Reserves, the Kingdom’s foreign exchange reserves fell 32% in just the past two and a half years.  Well, according to the Trading Economics data, the Saudi’s liquidated another $9.8 billion of their foreign currency reserves in February:

Because the Saudi’s continue to liquidate their foreign exchange reserves (mostly U.S. Treasuries), then the price they are getting paid for their oil isn’t high enough to support their national government.  This is bad news, and it will only get worse when the broader stock markets finally start to crack.

The only option the Fed and Central Banks have remaining is all out hyperinflation.  Now, this could buy the Saudi’s some time as the oil price would surge higher, but we must remember, hyperinflation events don’t last that long… a few years at the most.

A perfect example of this is currently taking place in Venezuela.  It is certainly ironic that the country with the largest oil reserves in the world is completely falling apart.  Why is that?  Some point to the corrupt and inefficient government that is running their national oil industry.  That sounds reasonable at face value, but another important factor is that a large percentage of Venezuela’s heavy oil reserves are likely not commercially viable.

Regardless, Saudi Arabia is in serious trouble as it continues to burn through its cash while its net oil exports will trend lower in the future.  When Saudi Arabia’s oil production peaks for good, it will be the end of an era for once mighty Kingdom.

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29 Comments on "Two Charts Why The Middle East’s Largest Oil Producer Is In Serious Trouble"

  1. *hat tip to the host*

    Great charts, with dire implications. The draw-down on reserves actually seemed to be accelerating in the second graph, DESPITE the fact that oil prices were coming off the January lows of 2016. That’s a +10 percent draw down in less than a year.

    The rising fuel consumption of SA in the first graph could also be interpreted in a broad-sense EROEI, and it seems to be accelerating as well and now stands close to 30%. Scary.

    SA and all oil producing nations sure are facing a fundamental, serious problems… …and by extension, so does the rest of the world. They just can’t print the oil, aye ? I wonder if Texas got the memo… “Houston…”

    • crude oil prices are going to fall. How is it possible that silver prices decouple and go up?

      • Actually, I think oil production is going to fall eventually, but since they are one the inflation path I do not think that we will revisit the recent sub 30$ lows, or if so, only for a short period of time, at least for the foreseeable future. Due to monetary inflation and a lower EROEI I think we will have rather higher oil prices or sideways trading, but I don’t have a crystal ball so this is my best guess… As for silver and gold, they are real, hard moneys and they will reflect the loss of purchasing power of the printed fiat currencies, be it $,€,Yen,Yuan,Ruble, Loonies or Swissies… They need more debt to manage the outstanding debt (inflate) or it all collapses (die) and they would have to issue new currencies – in which case you would also want to hold PMs and not worthless fiat. However, for now the CONeX and the LBMA are the main price-setting mechanism for the PM prices, and until they go belly-up, they can issue as many contracts as needed to fulfill any demand of paper silver and paper gold. But not the fizzical metal, which is systematically sucked up along the yellow bRICs road. I think what is going on now is similar to the bust of the London gold pool in the late 60ies, when countries like France were draining them of gold reserves (swapping their $s for bullion). China is doing exactly that via the SGE.

  2. King Muhammad al Saud Bin Ibn Whatthef*ck is welcome in the Netherlands if he brings his gold with him.

  3. Interesting that you didn’t mention the Saudis plan to sell interests in Aramco to raise money.

    • SteveW,

      I did in a previous article. Wood Mackenzie, an energy analyst company stated that they calculated the value of Saudi Aramco’s oil reserves are worth one-fifth of the IPO’s value. Why in the hell is Saudi Arabia doing an IPO if it could make money selling its oil??

      I don’t think Saudi Aramco has all the reserves they say they do.


  4. Hyperinflation is not the only option, another option was used recently: war, Lybia-style. Suddenly, a freedom movement emerges in the Easter regions — where all Saudi oil and oil infrastructure is concentrated — to confront the bloody islamist dictatorial regime. A few martyrs are spinned, beautiful babies and such. In no more than six months of professional spin campaign, everyone and their 17-year old cat will want Saudi regime taken down, and their oil liberated. This template was executed in Lybia. And the pieces are in place already: Saudis are at war, and it does not go well for them. They bomb civilians in Yemen, and Yemenis respond with ballistic missiles. This pre-mixed war can be skillfully guided towards a resolution that would liberate the oil from Saudis. The only obstacle to that is the fact that Yemeni fighters are backed by Iran, and Iran cannot be allowed to be the beneficiary of Saudi downfall. So, some handywork is required, but it is totally doable if or when necessary. No one in the West would really argue in favour of preserving Saudi souvereignty if liberation of their oil can postpone the big energy event; and Saudis do not really have friends in the East. Actually, they seem to not have any friends outside of the Gulf.

  5. Steve, Not worry – here is a silver based solution – this is an amazing double for you to ponder. A virtual unlimited energy source that uses silver as a catalyst. And it seems to explain Dark Matter and Dark Energy.

    • BTW I contacted the company. The platform they plan to scale from for commercial applications uses over 8 troy ounces of silver per module.

    • JerseyJoe,

      Unfortunately, I do not share your enthusiasm about Brilliant Light Power. I have to be blunt here because I receive so many emails on this technology, that I don’t have time to say it nicely. Brilliant Light Power is just another version of SNAKE OIL peddled during the early 1900’s.

      The founder of Brilliant Light Power changed the name from Black Light Power because years of failed promises caused a lot of investors and followers to leave. This is one of the oldest tricks in the book. The mining industry does the same thing by changing the name of a lousy noncommercial mining stock (95% are). It’s called putting lipstick on a pig.

      Lastly, even if Brilliant Light Power was able to provide some of what it says, our problem is not with generating electricity. Rather, our JUST IN TIME INVENTORY system runs on LIQUID FUELS. This technology, even if it worked (it really doesn’t), does not address the liquid energy problem that we are going to face in the next 5-10 years.

      We have just run out the clock.


      • I don’t believe you have looked close enough.

        • Steve

          Why don’t you look closer? The company is very close to a commercial product having failed following other paths.

          How many times did Edison fail trying to make his lightbulb? This is not a cheap under taking. And failure is the very essence of the creative process.

          You ignore all the physicists who have analyzed what they have found and believe it is a real phenom of physics heretofore misunderstood.

          I think the real reason you discount this offhand – it flies in the face of your “apocalypsy.” What drum would you beat if doomsday was not just around the corner?

          • lastmanstanding | April 10, 2017 at 7:14 am |

            Edison had all the money in the world behind him to succeed.

            J P Morgan saw to it that failure was not an option when the ultimate in profit/soft slavery was to be had.

  6. Steve: Can’t you see why I write what I do. All your writings are with regard to a collapse in the economy or the dollar. And adding to that they are all 10 to 20 years down the road. NGLs now produce gasoline. And there is 90 years of natural
    gas in our earth. Anyone can say silver will be worth more in 20 years than it is today. But, to buy at the proper time is investing not out of fear created by “supposing” certain things could happen. The answer is “when” not “if.”

    • Joe Lindell,

      If you don’t mind, I will no longer reply to your comments. Others are more than welcome to do so. You continue to say the same thing over and over. 90 years worth of natural gas… LOL. I gather you believe that MSM nonsense. You do not understand the difference between TECHNICALLY RECOVERABLE RESERVES and COMMERCIAL… that which is profitable.

      Anyhow… you are more than welcome to continue saying the same thing, but you are blind to the many important details as you do not READ EVERYTHING that I or other alternative energy analysts have been writing for the past several years, and longer.

      Let me conclude by saying this. Does it matter if someone forecasting the end of the NAZI REGIME in WW2 was off by a few years, or did it matter that what the NAZI’s (or any other CANCEROUS EMPIRE) were doing was horribly wrong… and that NO ONE SHOULD BE APART OF IT.

      You have an option of selling your precious metals and going ALL IN THE BIGGEST STOCK MARKET PONZI SCHEME in history. You can also decide to stop coming in here and wasting your time leaving the same comments when you can spend it more wisely with your family.

      However, when the MARKETS CRASH… please be sure to come in here and let us know how GOOD of an investment strategy that was for you.

      Or, you can think with more WISDOM, that should come with old age. If you think about gold and silver as INSURANCE, then you can stop worrying about the so-called PRECIOUS METALS DEALERS who are supposedly ripping off people by helping them get into a GOOD FINANCIAL INSURANCE POLICY. You waste time BICKERING and COMPLAINING about something that is only a small part of your investments.


      • That’s not very nice Steve. You use charts and noted ” silver personalities” and you’ve been peak oil since I knew you. Yet silver is in the doldrums. No one gives a darn. There is simply no demand. All the things you write about are 10 to 20 years in the future. Under trump the stock market will be O.K. over the next 4 years and if he is re-elected another 4 years. And where will silver be? Regardless of how you feel about me saying the same things, what about you? There simply is no demand Steve. I don’t care about manipulation. If demand was really up, silver would be up. Your writings are simply years
        down the road. Why do I know this? It is because rich people would be buying silver and they are not stupid. Your hype is premature. Even a Korean war, or Iraq, or Russia and no one is jumping in on silver. Over the past 10 years what have the Morgans, the Clouds, etc.have done for investors? You now call it insurance.It is you that needs a wake up call Steve.

  7. Excellent chart. And it’s likely that Saudi oil consumption will continue to rise as total production begins to fall, further accelerating the situation. Great work Steve, thanks for doing what you do…

  8. Wow Steve, I was watching Cliff High interview on Greg Hunters USA Watchdog today and at about 39:50 he gets right to your point of declining EROI and its grave consequences. (sorry about the pun)

    I wonder how long it will take for this concept to permeate through alt-media and then finally to the masses? Thanks for all you do, and I saw it here first.

  9. Aramco ipo is weird stuff. First, the Saudis pump out oil for decades, and then, they want to raise capital to pump up more?

    Don’t think so. The ipo is compensation for capital shortfall. Ipo won’t happen imho. Its like buying a Tesla with the batteries removed. The world is stupid, but not THAT stupid.

  10. Thanks Steve, regards

  11. The wave patern is actually in direction 12-13 $.My chart provider was right the last year.As long as this patterns not changes we get an awful crash in silver.

  12. From 1976 to 2015 Saudi refinery capacity has quadrupled to 2.8 M bpd. They are exporting some of these products.

    Saudi has been and will continue to transform from simple crude producer to high value refined petroleum products.

    Typical progression in maturity,

    Low crude prices are hurting every producer globally, but then that helps other energy intensive industries such as silver mining that was predicted to implode years ago because of high energy input costs…

    • kb,

      While it is true that Saudi Refinery capacity has quadruped since 1976, it does not change its NET OIL EXPORT FIGURES. The Saudi economy is just consuming more oil, just like most other oil producing countries.


      • My point is that the increase in apparent consumption is the quadrupling in refining. But that is offset when those refined products are sold on the global market instead of as crude.

        Those so called 2 charts don’t provide any reasonable breakdown so the title of the blog post ID not really supported. But it could be if adequate detail was provided.

        • kb,

          We must remember, OIL CONSUMPTION is not taking oil and REFINING it then exporting it. OIL CONSUMPTION is that which is consumed by the Saudi domestic economy. Production minus consumption equals NET EXPORTS. Saudi Arabia’s population has surged from 6 million in 1970 to 32 million people currently. Thus, Saudi’s population has increased more than five times. Furthermore, the Saudi’s burn a lot of oil to generate electricity, especially during the really hot months.

          The United States also refines a lot of petroleum products and exports them. For example, the United States produced 12.7 million barrels per day (mbd) total petroleum liquids in 2015, while it consumed a total of 19.4 mbd. Thus, its net imports were 6.7 mbd in 2015.


  13. “Jeffrey Brown: To Understand The Oil Story, You Need To Understand Exports”

    Peak Oil is very much alive
    by Adam Taggart
    Sunday, September 13, 2015,

    Despite the attention-grabbing economic volatility that is grabbing headlines, it’s important to keep our eye on the energy story firmly in focus. This is especially true as the headlines we regularly read about Peak Oil being dead ” are “manifestly false” according to this week’s podcast guest, petroleum geologist Jeffrey Brown.

    As concerning as the fact that global oil production has plateaued over the past decade, despite trillions invested in trying to goose it higher, are Brown’s forecasting model for oil exports. His Export Land Model shows how rising internal consumption can swing (and has swung) countries from major exporters to permanent importers within a dizzyingly short period of time:

    The crucial issue to understand about what has happened after 2005 is that we’ve had a very large increase in global gas production and natural gas liquids, but a much slower increase in crude plus condensate. So, what I think has happened is the actual crude oil production has basically flatlined while the liquids associated with natural gas production, condensate and natural gas liquids, have continued to increase. So, we ask for the price of oil, we get the price of Brent or WTI; but when you ask for the volume of oil, you get some combination of crude, condensate, natural gas liquids, biofuels. So, the fact is that substitution has worked and is working in that they’re bringing on alternative substitutes, but they’re only partial substitutes. The actual, physical volume of crude oil production has probably been flat to down since 2005. Over the past ten years, it has taken us trillions of dollars, basically, to keep us on an undulating plateau in actual crude oil production. What happens going forward?

    So, basically, the conventional wisdom is the fact that we’ve seen an increase in liquids production, seems there’s no evidence of the peak in sight. And, I think in regard to crude oil production, that argument is manifestly false. I think that we’ve probably seen a peak in actual crude oil production, 45 and lower API gravities, despite trillions of dollars of upstream capex expenditures.

    I started wondering in late 2005 what happens to oil exports from an exporting country, given a production decline and rising consumption. And, so I just started, I just constructed a simple little model. I assumed a production of about two million barrels a day or so at peak, consumption of one, and assumed production falls about 5% per year, basically what the North Sea did, and assumed consumption increases to 2.5% per year. What the model showed was that exports, net exports would go to zero in only nine years, even though a roughly modest production decline. So, the easy way to state it is giving an ongoing, inevitable decline in production, unless an exporting country cuts their domestic oil consumption at the same rate as the rate of decline in production, or at a faster rate, it’s a mathematical certainty that the net export decline rate, what they actually ship out to consumers will exceed the rate of decline in production. And, furthermore, it accelerates.
    Click the play button below to listen to Chris’ interview with Jeffrey Brown (43m:48s)

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