What Would The Kingdom Of Saudi Arabia Do With All Their Oil Reserves?

Saudi Arabia currently has a lot of oil enough to put so many other producers out of business.  With the level of technological developments happening in the world today, the Kingdom will have a lot of trouble in their hands if the world suddenly does not need their oil.

However, a bigger problem will arise if the Kingdom decides to do away with all their oil as producers from the rest of the globe will find it almost impossible to break even.

Before recent discoveries, Saudi Arabia and other countries across the Persian Gulf were all thought to have inflated their oil reserves due to political gains in the 1980s.

All the five Persian Gulf nations announced a large increase in their oil reserves between the early and late 1980s. The group then tried to develop a concrete method of distributing output quotas. One of the requirements for allocating output quotas then was based on reserves.

About six countries revealed their new reserves, with the figures increasing significantly by 86% despite no reasonable increase in exploration. Within five years, their total oil reserves rose from 56% to a whopping 68% in 1988.

Their reserves have been relatively stable since then although these countries do not pump more than roughly 12 Bbbl every year.

These increases show that the countries are all revealing previous oil discoveries which were made only state secrets before they could gain full control of their country’s oil sector.

The big question now is how much do these oil reserves worth?  Before these discoveries, Oil was considered as naturally degrading resources. Countries with huge reserves argued that the value of their reserves could only increase when other producers exhaust their natural resources; leading to global demand of their reserves as the resources become very scarce.

However, with the recent commitment by the two major oil producers to cut down on their output, producers from West Africa, Canada, Venezuela, and the United States can only pray that the Kingdom of Saudi Arabia does not adopt measures to expand its oil sector to boost production that would keep them out of business.

Leave a Reply

Your email address will not be published. Required fields are marked *