Kalia_Test Posted March 5, 2015 Author Posted March 5, 2015 i think we are mostly self reliant except oil .. we are not that much dependent on exports like china.. we are importing huge amounts of oil but the trade imbalance is offset by currency Repatriation.. but make in india will definitely will improve our economy exponentially True...For India the KG basin natural gas discovery is really HUGE IMO....As of now, Natural gas is not economically viable compared to petrol/diesel in some industries for various reasons but the differential is not very big. If we focus on making Industries use natural gas and keep some pests like Reliance out ( that keep going to courts for unit price,etc ), we should be OK. Another major culprit is auto...Increased mass public transport ( metros,etc ) in major cities will drastically cut our oil dependency....
randomGuy Posted March 5, 2015 Posted March 5, 2015 1. It will deplete their resources very very rapidly. 2. There are many OPEC agreements...SA cannot just decide to supply all Oil requirement in world...Other OPEC nations will kill them. 3. Logistically too, buying oil from countries where extraction costs may be high but transport costs will be low will make sense in some cases. 4. It can't sell more than the demand ( so even a small size world slowdown will wipe it out). Also kindly look at graph posted in earlier post...It gives the true picture what price SA actually needs... Saudi export as much as all other OPEC nations combined.... Besides the fact that most OPEC member nations are ethnic Arabs only. Saudi runs the OPEC. They can't sell more than the demand but they can cater to most of the demand at very competitive prices
Kalia_Test Posted March 5, 2015 Author Posted March 5, 2015 feck me look at Iran lol Good observation. If you see, Obama and Netanyahu have been literally fighting in last 2-3 days ( Netanyahu went to US Congress on invitation by Republicans or something ). I am sure Obama fears Iran collapsing and that wont be good for anyone...and Israel should be really worried. Netanyahu should let Iran survive for now ( who knows - they might have nukes already)
FischerTal Posted March 5, 2015 Posted March 5, 2015 Good observation. If you see, Obama and Netanyahu have been literally fighting in last 2-3 days ( Netanyahu went to US Congress on invitation by Republicans or something ). I am sure Obama fears Iran collapsing and that wont be good for anyone...and Israel should be really worried. Netanyahu should let Iran survive for now ( who knows - they might have nukes already) I heard on cnn that Iran is helping us take out Isis.
Kalia_Test Posted March 5, 2015 Author Posted March 5, 2015 Saudi export as much as all other OPEC nations combined.... Besides the fact that most OPEC member nations are ethnic Arabs only. Saudi runs the OPEC. They can't sell more than the demand but they can cater to most of the demand at very competitive prices Though I don't agree with this completely ( I have read OPEC agreements some time back and Saudi just cannot do it...all the other countries will be BUST before SA - dont think others will let it happen), still they need 80$ plus to meet their budget - meaning they are depleting their forex each day crude is below 80$ plus...
G_B_ Posted March 5, 2015 Posted March 5, 2015 I heard on cnn that Iran is helping us take out Isis. thats a shia sunni faultline. Whats Russia's budget tolerance in all this?
randomGuy Posted March 5, 2015 Posted March 5, 2015 Though I don't agree with this completely ( I have read OPEC agreements some time back and Saudi just cannot do it...all the other countries will be BUST before SA - dont think others will let it happen)' date=' still they need 80$ plus to meet their budget - meaning they are depleting their forex each day crude is below 80$ plus...[/quote'] Yar they can catagorize their spendings as useless, very useless n very very useless spendings and cut off the very very useless spendings. Point is they can price the oil most competitively n will still be profitable while other producers will go bankrupt. Plus their portfolio investments all over the world. So one can't have Saudis working in fields (services manufacturing etc)other than oil extraction
Kalia_Test Posted March 5, 2015 Author Posted March 5, 2015 Yar they can catagorize their spendings as useless, very useless n very very useless spendings and cut off the very very useless spendings. Point is they can price the oil most competitively n will still be profitable while other producers will go bankrupt. Plus their portfolio investments all over the world. So one can't have Saudis working in fields (services manufacturing etc)other than oil extraction I am not at all disputing that SA can price their oil competitively. They can and will do and they will earn profit also. My only point is that the profit is no way near what it needs to meet its other requirements ( which they have to import ). Yar - look at the graph I posted...SA NEEDS Oil above 80$ to meet its requirements. They will temporarily be OK and even willing if Oil price is low ( to kill competition - they can use reserves in meanwhile ) but they NEED Oil above 80$.
randomGuy Posted March 5, 2015 Posted March 5, 2015 I am not at all disputing that SA can price their oil competitively. They can and will do and they will earn profit also. My only point is that the profit is no way near what it needs to meet its other requirements ( which they have to import ). Yar - look at the graph I posted...SA NEEDS Oil above 80$ to meet its requirements. They will temporarily be OK and even willing if Oil price is low ( to kill competition - they can use reserves in meanwhile ) but they NEED Oil above 80$. Catagorize the expenditure. Cut the most useless expenditure like useless decorative item imports $80 figure is immensely overstated. Oil price has been >80$ for just 4-5 years in history. Historically oil prices have been below 60$ . u can google oil price charts.
Kalia_Test Posted March 5, 2015 Author Posted March 5, 2015 Catagorize the expenditure. Cut the most useless expenditure like useless decorative item imports $80 figure is immensely overstated. Oil price has been >80$ for just 4-5 years in history. Historically oil prices have been below 60$ . u can google oil price charts. I have not created the 80$ bhai...It is from SA budget based on its population's and government's spending and reported by multiple sources. And this is the point I wanted in my OP. How will SA people react if they are asked to moderate their lifestyle or if some of their perks are taken off... Trust me - SA was just an example...the entire OP was about what geopolitical implications will be there ( rebellion in SA and other Arab countries - they have no idea of how economy works and that you need to work to earn a meal )
randomGuy Posted March 5, 2015 Posted March 5, 2015 I have not created the 80$ bhai...It is from SA budget based on its population's and government's spending and reported by multiple sources. And this is the point I wanted in my OP. How will SA people react if they are asked to moderate their lifestyle or if some of their perks are taken off... Trust me - SA was just an example...the entire OP was about what geopolitical implications will be there ( rebellion in SA and other Arab countries - they have no idea of how economy works and that you need to work to earn a meal ) $80 fig. is wrong n misleading. U can see the historical oil prices for itself. For only 4-5 yrs it has gone over $80. Think How was SA running when it was below $60 for rest of the history? FED was printing dollars for QE. So dollar was cheap n oil prices rose. Now FED has stopped qe n is increasing repo rate. N u can see the impact on dollar index ( very very high) so oil price had to come down. Plus the over supply due to shale. Nothing will impact Saudis. Their business has great moat. And pls do not believe$80 figure
Kalia_Test Posted March 5, 2015 Author Posted March 5, 2015 ^^^ 80$ is NOW. Not historically. And this is after QE and stuff. Their expenditure has also risen BTW... SA former oil head said SA can withstsnd 4-5 yrs only of low prices. And I believe it...
zen Posted March 5, 2015 Posted March 5, 2015 I skimmed through this thread so sorry if I missed something. SA may need $80 to balance its budget based on current scenario. However, it can manage because it has deep pockets. Additionally, if there are issues related to deficit, a country can take various measures including cutting costs down, increasing taxes, borrowing, etc. Let's not forget that there are countries that have huge budget deficits including the U.S.
Kalia_Test Posted March 5, 2015 Author Posted March 5, 2015 I skimmed through this thread so sorry if I missed something. SA may need $80 to balance its budget based on current scenario. However, it can manage because it has deep pockets. Additionally, if there are issues related to deficit, a country can take various measures including cutting costs down, increasing taxes, borrowing, etc. Let's not forget that there are countries that have huge budget deficits including the U.S. :two_thumbs_up: - SA is using its reserves now as they indeed have deep pockets as you said ( no issues whatsoever for 4-5 years as per their official) Cutting costs down - This is where the issue is. SA citizens are used to pampering and never had a need to develop skills ( I am not saying they cannot just that generations have never had the need). So any cost cutting ( meaning less amenities for its populace ) will face resistance. Increasing taxes - They have not got anything other than oil for taxes. There is no agriculture, manufacturing or services. Who will they tax? Borrowing - Who will lend? Are they geopolitically important without their Oil need? How will the borrowers recover their money back? That is exactly the dutch disease...SA needs to have a diversified economy and not wait till it is too late...else it will also be like Venezuela now.
zen Posted March 5, 2015 Posted March 5, 2015 :two_thumbs_up: - SA is using its reserves now as they indeed have deep pockets as you said (no issues whatsoever for 4-5 years as per their official) That could be bad for others as well not necessarily Saudi Arabia. Price is a function of supply and demand. The supply is on the rise esp. with production increasing in North America. Lower oil prices have affected production (and investment) in North America, esp. the tar sands in Canada. The investment (and interest) in alternate would decline too. So Saudi can benefit in the long term Also the variable cost of production of wells is lower. As long as Saudi is able to cover its fixed cost, its oil companies are fine Cutting costs down - This is where the issue is. SA citizens are used to pampering and never had a need to develop skills ( I am not saying they cannot just that generations have never had the need). So any cost cutting ( meaning less amenities for its populace ) will face resistance. Increasing taxes - They have not got anything other than oil for taxes. There is no agriculture, manufacturing or services. Who will they tax? Borrowing - Who will lend? Are they geopolitically important without their Oil need? How will the borrowers recover their money back? In theory, that may be the case. But reality could be different. Saudi knows that oil is a depleting resource so it is already taking steps in attracting investment. For e.g. - King Abdullah Economic City There are both direct and indirect ways for the government to tax Are we assuming that Saudi will have zero oil in the next few years? With the holy cities of Mecca and Medina, Saudi is important enough even from a tourism perspective. IIRC, Saudi is opening up its financial sector as well That is exactly the dutch disease...SA needs to have a diversified economy and not wait till it is too late...else it will also be like Venezuela now. Agree. That could be true for any country which is heavily dependent on one particular sector. Even countries that relied heavily on manufacturing suffered as a low cost manufacturer will threaten to take the jobs away Responses in dark red
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