After Saudi Arabia failed to achieve the simpler successes in the first oil price war (2014-2016) and the second (from the beginning of March to the end of April), it can be assumed that the Saudis learned the main lessons about the dangers of engaging in such wars again. .
But going back to the many statements issued the week before last, it seems that Saudi Arabia has not learned anything, and may launch an oil price war just as it did the two previous times, and it is likely that it will lose again with the same tragic repercussions that it and the rest of OPEC members may bear, according to For a report published by the American "Oil Price" website, by Simon Watkins.
In the author's opinion, with regard to the statement of "the maximum sustainable production capacity", Saudi Arabia has used this term repeatedly since the disaster of the first oil price war; To cover two other long-standing illusions related to the true level of its crude oil reserves and the true level of its reserve capacity.
Reserve capacity
Before the first oil price war, Saudi Arabia had stated for decades that its spare capacity was between 2 and 2.5 million barrels per day, meaning that it had the ability to increase its production to about 12.5 million barrels per day when needed.
But even as the oil price war continues between 2014 and 2016, and causes new levels of economic devastation to Saudi Arabia and the rest of OPEC, the kingdom can produce an average of no more than 10 million barrels per day.
According to the Energy Information Administration, spare capacity is defined as production that can be generated within 30 days and lasts for at least 90 days, while the Kingdom said it would need at least 90 days to move rigs to drill new wells and increase production by 2 to 2.5 million barrels. Daily.
Instead, Saudi Arabia began trying to obscure this lie about spare capacity, and senior Saudis talked about capacity and supplies to markets instead of output or production in a clear confusion of terms.
Capacity relates to the use of stored crude oil supplies at any time in the Kingdom, in addition to supplies that can be blocked from contracts, and redirected to those stored supplies, and capacity can also include oil that is secretly purchased from other suppliers through brokers in the spot market and passed on afterwards. In the form of oil supplies for the Kingdom.
It is clear that exactly the same semantic deception was used to cover up the actual supply shortage in the aftermath of the September 2019 attacks by the Iranian-backed Houthis on the Khurais and Abqaiq facilities in Saudi Arabia.
The writer believes that the reason for Saudi Arabia’s efforts to obscure its real production and spare capacity numbers is that oil has been the cornerstone of its geopolitical power since its discovery in the thirties of the last century, so it also lies about its oil reserves.
Blackout and mislead
At the beginning of 1989, Saudi Arabia claimed that proven oil reserves had reached 170 billion barrels, but after a year of that, and without discovering any major new oil fields, the number increased by 51.2%, to reach 257 billion barrels, and after a short period, it rose again to Just over 266 billion barrels, to reach in 2017 more than 268 billion barrels.
The writer pointed out that Saudi Arabia at that time extracted an average of 8.162 million barrels per day of oil between 1973 and 2020, that is, a total of more than 2.979 billion barrels of crude oil annually, or 137.04 billion barrels of crude oil during that period.
Given these proven percentages, with no new fields being discovered, and the decline in production of fields under exploitation such as the Ghawar field, it is mathematically very difficult that the real stock is not in the range of 120 billion barrels, and not the declared number of 268 billion barrels (given the number 257 (Billion barrels of doubt as the basis for those calculations).
Realizing that the basic figures on which Saudi Arabia's remaining geopolitical and economic strength is based are nothing but nonsense. Salman desperate not to lose his personal credibility by allowing the Aramco IPO to fail, especially in Saudi Arabia.
Mistakes are repeated
The writer said that Saudi Arabia's problem lies in the collective self-delusion of those at the head of its government, regarding the kingdom's main figures related to the oil industry, which the entire system supports. It is clear that these illusions have not been discouraged by any of the senior foreign advisers, who earn their banks huge fees and commercial profits from the various mistakes committed by Saudi Arabia, most notably the oil price wars.
Among the most obvious examples of this is Saudi Aramco's chief executive, Amin Nasser, who said the week before last that Aramco would go ahead with plans to increase its maximum sustainable production capacity to 13 million barrels per day from 12.1 million barrels per day.
Regardless of the absolute indifference in the midst of a world already awash in oil as a result of declining demand due to the Corona epidemic, this statement from the third-degree oil man in Saudi Arabia is very misleading, and it fuels the collective understanding of the oil market since the first oil price war (between 2014 and 2016) that says: Anything Saudi Arabia reveals about its oil industry should not be considered true without further investigation.
Ironically, this is due to Saudi Arabia starting another oil price war; To destroy the shale oil sector in the United States by smashing prices with overproduction at a time when demand is declining due to the Covid-19 pandemic, according to the writer.
The author believes that the previously mentioned figures will completely lose their meaning if the Kingdom launches a similar war soon, as is evident from its announcement that it will increase the maximum sustainable production capacity to 13 million barrels per day instead of 12.1 million barrels per day. But the result next time may be the end of the House of Saud, according to him.